Essex Property Trust (NYSE: ESS) and AvalonBay Communities (NYSE:AVB) are both large-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, dividends, profitability, earnings and risk.

Dividends

Essex Property Trust pays an annual dividend of $7.00 per share and has a dividend yield of 2.8%. AvalonBay Communities pays an annual dividend of $5.68 per share and has a dividend yield of 3.1%. Essex Property Trust pays out 87.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AvalonBay Communities pays out 88.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Essex Property Trust has raised its dividend for 5 consecutive years and AvalonBay Communities has raised its dividend for 23 consecutive years. AvalonBay Communities is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Essex Property Trust has a beta of 0.5, suggesting that its share price is 50% less volatile than the S&P 500. Comparatively, AvalonBay Communities has a beta of 0.35, suggesting that its share price is 65% less volatile than the S&P 500.

Institutional and Insider Ownership

97.3% of Essex Property Trust shares are owned by institutional investors. Comparatively, 95.1% of AvalonBay Communities shares are owned by institutional investors. 3.3% of Essex Property Trust shares are owned by company insiders. Comparatively, 0.5% of AvalonBay Communities shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Essex Property Trust and AvalonBay Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Essex Property Trust 38.95% 8.19% 4.20%
AvalonBay Communities 41.55% 8.66% 4.94%

Earnings & Valuation

This table compares Essex Property Trust and AvalonBay Communities’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Essex Property Trust $1.29 billion 12.71 $414.97 million $7.99 31.16
AvalonBay Communities $2.05 billion 12.31 $1.03 billion $6.40 28.50

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

Analyst Ratings

This is a breakdown of current recommendations and price targets for Essex Property Trust and AvalonBay Communities, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Essex Property Trust 2 7 10 0 2.42
AvalonBay Communities 1 8 8 0 2.41

Essex Property Trust currently has a consensus target price of $270.00, indicating a potential upside of 8.43%. AvalonBay Communities has a consensus target price of $200.31, indicating a potential upside of 9.84%. Given AvalonBay Communities’ higher possible upside, analysts plainly believe AvalonBay Communities is more favorable than Essex Property Trust.

Summary

AvalonBay Communities beats Essex Property Trust on 9 of the 17 factors compared between the two stocks.

About Essex Property Trust

Essex Property Trust, Inc. is a self-administered and self-managed real estate investment trust. The Company is engaged primarily in the ownership, operation, management, acquisition, development and redevelopment of predominantly apartment communities, located along the West Coast. Its segments include Southern California, Northern California, Seattle Metro and Other real estate assets. The Company owns all of its interest in its real estate and other investments directly or indirectly through Essex Portfolio, L.P. (the Operating Partnership). Its properties include Mio, Form 15, Emerson Valley Village and Ashton Sherman Village. As of December 31, 2016, it owned or held an interest in 245 communities, aggregating 59,645 apartment homes, excluding its ownership in preferred equity investments, as well as two operating commercial buildings (totaling approximately 140,564 square feet), and six active development projects with 2,223 apartment homes in various stages of development.

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 June 30, 2017, the Company owned or held a direct or indirect ownership interest in 287 apartment communities containing 83,123 apartment homes in 10 states and the District of Columbia, of which 23 communities were under development and nine communities were under redevelopment. 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.

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