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No. of Recommendations: 17
Avalon Bay upscale apartments REIT has been on my watchlist for some time, but its yield in the high 2% to low 3% range just hasn't been quite enough to consider it. But with the recent market decline and the concern the economy will slow, along with a full market of high-rent apartments, has seen AVB's dividend get much more attractive. It closed today at about a 4.3% yield, as high as I can recall it being.

So I pulled down their CF numbers and ran them thru Excel.

Using rolling 4Q, Revenue per share and CFFO per share are pretty stable at low $4.20s and mid $2.30s. Most important, I don't see a decline in 1Q and 2Q20, although there has been a slight decline that began 3Q19, but its small.

AVB has one of the lowest interest expense to CFFO + Interest ratios in REITdom. In fact, adding together all distributions to non-controlling interests along with their interest expense, divided by CFFO + Interest expense is running consistently around 14.3% to 14.8%. Very low, and helps explain how they are able to fund 40% to 60% of the CFFI with operational cash. This is very high for a REIT. Dividend to Net CFFO payout ratio runs in the mid 60% range going back to 1Q14, currently inched up to 68%.

Dividend growth has gradually slowed from 7% to 8% back in 2012-2015, slowed to 3.5% for 2018-19 but picked back up to 4.6% for 2020, assuming the 4Q20 dividend remains the same.

And for 2019, 96% of the dividend was ordinary income with a small amount of capital gains.

AVB looks great at this yield. I think the DGR is going to stay in the 3% to 5% range for a while, but its cash flows are solid.

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