AvalonBay Communities (AVB 2.25%) is one of the country's largest apartment landlords, with almost 95,000 units across a dozen states. It has a diversified portfolio spanning major coastal markets and growing metro areas in the Sunbelt region.
The residential REIT has an excellent record of growing shareholder value, delivering an average annual total return of 11.7% since its IPO. A big driver of those returns is its dividend. A key reason to buy AvalonBay is its high 3.5% current yield, along with its steadily rising payout. It's had a 4.8% compound annual growth rate since 2000.
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AvalonBay Communities currently pays a quarterly dividend of $1.75 per share, or $7 annually. It raised its payment by 2.9% earlier this year and nearly 300% since its IPO in 1993.
The landlord easily supports this payment. It expects $11.14 to $11.64 in core funds from operations (FFO) per share this year. Its conservative payout ratio lets it retain cash for new investments. AvalonBay also has an elite balance sheet, providing additional flexibility for expanding its apartment portfolio.
The REIT used its flexibility to buy eight apartment communities in Texas earlier this year for a combined $618.5 million. AvalonBay also has $3 billion of development projects under way that it expects to complete over the next couple of years. It still has $2.8 billion of liquidity to fund additional accretive growth investments as opportunities arise.
In addition, AvalonBay's existing apartment portfolio should continue to benefit from strong apartment demand across its markets. This catalyst should keep occupancy levels high and drive up rental rates. Rising rents and portfolio growth should drive above-average net operating income growth, supporting continued dividend increases.
AvalonBay's high-yielding and steadily rising dividend makes it a great stock to buy for those seeking to make passive income from real estate.
