AvalonBay Communities (NYSE: AVB) and Equity Residential (NYSE:EQR) are both large-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, risk, profitabiliy, dividends, valuation, analyst recommendations and institutional ownership.

Risk and Volatility

AvalonBay Communities has a beta of 0.34, suggesting that its share price is 66% less volatile than the S&P 500. Comparatively, Equity Residential has a beta of 0.33, suggesting that its share price is 67% less volatile than the S&P 500.

Institutional & Insider Ownership

99.0% of AvalonBay Communities shares are owned by institutional investors. Comparatively, 95.3% of Equity Residential shares are owned by institutional investors. 0.5% of AvalonBay Communities shares are owned by company insiders. Comparatively, 3.8% of Equity Residential shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares AvalonBay Communities and Equity Residential’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AvalonBay Communities $2.05 billion 12.67 $1.31 billion $7.51 25.18
Equity Residential $2.41 billion 9.90 $1.56 billion $2.29 28.38

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

Analyst Ratings

This is a summary of recent recommendations for AvalonBay Communities and Equity Residential, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AvalonBay Communities 1 8 7 0 2.38
Equity Residential 2 11 3 0 2.06

AvalonBay Communities presently has a consensus price target of $194.09, suggesting a potential upside of 2.64%. Equity Residential has a consensus price target of $66.69, suggesting a potential upside of 2.64%. Given AvalonBay Communities’ stronger consensus rating and higher probable upside, equities research analysts clearly believe AvalonBay Communities is more favorable than Equity Residential.

Profitability

This table compares AvalonBay Communities and Equity Residential’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AvalonBay Communities 50.12% 10.31% 5.87%
Equity Residential 35.18% 7.46% 3.79%

Dividends

AvalonBay Communities pays an annual dividend of $5.68 per share and has a dividend yield of 3.0%. Equity Residential pays an annual dividend of $2.02 per share and has a dividend yield of 3.1%. AvalonBay Communities pays out 75.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Equity Residential pays out 88.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Equity Residential has increased its dividend for 5 consecutive years. Equity Residential is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

AvalonBay Communities beats Equity Residential on 11 of the 17 factors compared between the two stocks.

About AvalonBay Communities

AvalonBay Communities, Inc. is a real estate investment trust (REIT). The Company is focused on the development, redevelopment, acquisition, ownership and operation of multifamily communities primarily in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. Its segments include Established Communities, Other Stabilized Communities and Development/Redevelopment Communities. As of January 31, 2017, it owned or held a direct or indirect ownership interest in 259 operating apartment communities containing 75,038 apartment homes in 10 states and the District of Columbia; 27 communities under development, and rights to develop an additional 25 communities. It operates its apartment communities under three core brands: Avalon, AVA and Eaves by Avalon. Its real estate investments consist of operating apartment communities, communities in various stages of development (Development Communities) and Development Rights.

About Equity Residential

Equity Residential is a real estate investment trust. The Company’s primary business is the acquisition, development and management of multifamily residential properties. Its segments include Boston, New York, Washington D.C., Southern California, San Francisco, Seattle and Other Markets. Southern California includes Los Angeles, San Diego and Orange County. Other Markets includes Phoenix. It is engaged in leasing of apartment units to residents. It focuses on rental apartment properties in urban and high-density suburban coastal gateway markets. As of December 31, 2016, the Company owned 302 properties located in 10 states and the District of Columbia consisting of 77,458 apartment units. The Company’s projects include The Alton, 455 Eye Street, 855 Brannan, Cascade, One Henry Adams, 340 Fremont and Vista 99. ERP Operating Limited Partnership (ERPOP) conducts the multifamily residential property business of Equity Residential.

Receive News & Ratings for AvalonBay Communities Inc. Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for AvalonBay Communities Inc. and related companies with MarketBeat.com's FREE daily email newsletter.