Investors who want to cash in on AvalonBay Communities Inc’s (NYSE:AVB) upcoming dividend of $1.42 per share have only 3 days left to buy the shares before its ex-dividend date, 28 December 2017, in time for dividends payable on the 16 January 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into AvalonBay Communities’s latest financial data to analyse its dividend attributes. View our latest analysis for AvalonBay Communities
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has the amount of dividend per share grown over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Will it have the ability to keep paying its dividends going forward?
Does AvalonBay Communities pass our checks?
The company currently pays out 87.64% of its earnings as a dividend, which means that the dividend is covered by earnings. Going forward, analysts expect AVB’s payout to increase to 124.02% of its earnings, which leads to a dividend yield of 3.37%. However, EPS is forecasted to fall to $5.13 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of AVB it has increased its DPS from $3.4 to $5.68 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock. In terms of its peers, AvalonBay Communities has a yield of 3.19%, which is on the low-side for reits stocks.
What this means for you:
Are you a shareholder? With AvalonBay Communities producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a robust dividend generator moving forward. But, depending on your portfolio composition, it may be valuable exploring other income stocks to improve your diversification, or even look at high-growth stocks to complement your steady income stocks. I suggest continuing your research by taking a look at my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.