Financial Survey: Highwoods Properties (NYSE:HIW) & AvalonBay Communities (NYSE:AVB)

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Highwoods Properties (NYSE:HIW) and AvalonBay Communities (NYSE:AVB) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, valuation, risk, institutional ownership, dividends and analyst recommendations.

Dividends

Highwoods Properties pays an annual dividend of $1.90 per share and has a dividend yield of 4.4%. AvalonBay Communities pays an annual dividend of $6.08 per share and has a dividend yield of 2.9%. Highwoods Properties pays out 55.1% of its earnings in the form of a dividend. AvalonBay Communities pays out 67.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Highwoods Properties has raised its dividend for 2 consecutive years and AvalonBay Communities has raised its dividend for 7 consecutive years. Highwoods Properties is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

93.4% of Highwoods Properties shares are owned by institutional investors. Comparatively, 91.8% of AvalonBay Communities shares are owned by institutional investors. 1.9% of Highwoods Properties shares are owned by insiders. Comparatively, 0.4% of AvalonBay Communities shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings for Highwoods Properties and AvalonBay Communities, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Highwoods Properties 1 0 3 0 2.50
AvalonBay Communities 1 7 7 0 2.40

Highwoods Properties presently has a consensus target price of $51.00, suggesting a potential upside of 19.33%. AvalonBay Communities has a consensus target price of $206.29, suggesting a potential downside of 2.24%. Given Highwoods Properties’ stronger consensus rating and higher probable upside, equities analysts clearly believe Highwoods Properties is more favorable than AvalonBay Communities.

Earnings & Valuation

This table compares Highwoods Properties and AvalonBay Communities’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Highwoods Properties $720.03 million 6.16 $171.83 million $3.45 12.39
AvalonBay Communities $2.28 billion 12.88 $974.53 million $9.00 23.45

AvalonBay Communities has higher revenue and earnings than Highwoods Properties. Highwoods Properties is trading at a lower price-to-earnings ratio than AvalonBay Communities, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Highwoods Properties has a beta of 0.8, suggesting that its stock price is 20% less volatile than the S&P 500. Comparatively, AvalonBay Communities has a beta of 0.52, suggesting that its stock price is 48% less volatile than the S&P 500.

Profitability

This table compares Highwoods Properties and AvalonBay Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Highwoods Properties 20.42% 6.59% 3.10%
AvalonBay Communities 45.94% 9.52% 5.40%

Summary

AvalonBay Communities beats Highwoods Properties on 10 of the 17 factors compared between the two stocks.

About Highwoods Properties

Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE:HIW) real estate investment trust (“REIT”) and a member of the S&P MidCap 400 Index. The Company is a fully-integrated office REIT that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Greensboro, Memphis, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa.

About AvalonBay Communities

As of March 31, 2019, the Company owned or held a direct or indirect ownership interest in 291 apartment communities containing 85,313 apartment homes in 12 states and the District of Columbia, of which 19 communities were under development and nine communities were under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas primarily in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States.

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