On Wednesday, AvalonBay reported fourth-quarter results that generally disappointed Wall Street investors as its funds from operations, or FFO, forecast for 2013 fell ever so slightly below expectations. However, I’d point out that its acquisition of Archstone Enterprise, which is expected to add apartment units to its portfolio, is the reason for the reduced near-term expectations. This is a long-term accretive deal that investors have incorrectly pegged as a negative. AvalonBay also has about 6,500 apartments in its development pipeline, according to Rod Petrik of Stifel Nicolaus.
One handsome dividend
As you might expect, as a REIT AvalonBay is required to pay out at least 90% of its net income as a dividend to shareholders and, in turn, receives favorable tax status from the government. AvalonBay’s dividend growth isn’t exactly consistent, but it’s done nothing but stay the same or head higher over the past decade:
Despite having little regularity with regard to dividend increases, AvalonBay still managed to grow its payout by an average of 5.1% per year since 2000, including Wednesday’s announcement that it was boosting its dividend by 10% to $1.07 per quarter.
AvalonBay is, hands down, the smartest play in a still-strong apartment sector. It offers investors the best mix of apartment units, catering to mid- and upper-income earners who often come with fewer headaches than what its peers deal with. AvalonBay’s dividend is growing, is yielding 3.3% based on its new quarterly payout, and looks poised to continue to deliver solid FFO as long as housing demand stays tight and the economy as a whole remains on shaky ground. It truly is a dividend you can count on.
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.