AvalonBay shares climb on dividend hike, buyback program
Apartment REIT delivers strong 2025 results and increases quarterly payout despite cautious multifamily outlook
AvalonBay Communities shares rose more than 2% in Wednesday trading after the apartment landlord announced a dividend increase and continued aggressive share repurchases, even as the company issued cautious guidance for 2026 amid broader headwinds in the multifamily housing sector.
The real estate investment trust reported fourth-quarter Core Funds From Operations of $2.85 per share, matching analyst expectations, while full-year 2025 Core FFO reached $11.24 per share, a 2.1% increase from the previous year. The company's board declared a first-quarter 2026 dividend of $1.78 per share, representing a 1.7% increase from the prior quarterly payout of $1.75.
Perhaps more significant for shareholders was AvalonBay's continued return of capital through buybacks. The company repurchased $488 million worth of its own shares during 2025, including $336 million in the fourth quarter alone, purchasing 1.89 million shares at an average price of $177.74. Approximately $164 million remains authorized under the company's current buyback program, providing additional capacity for future repurchases.
"Our 2025 results reflect the strength of our operating platform and our focus on high-barrier coastal markets," said Sean Breslin, president and chief executive officer of AvalonBay. "We continue to generate solid cash flow, which enables us to return capital to shareholders while maintaining financial flexibility."
For 2026, AvalonBay provided initial guidance for Core FFO of $11.00 to $11.50 per share, which represents relatively flat to modest growth compared with the 2025 actual of $11.24. The conservative outlook reflects ongoing challenges in the multifamily sector, including elevated supply in certain markets and softer rental demand that has pressured occupancy rates across the industry.
Analysts at Zacks Investment Research noted that while AvalonBay beat FFO estimates, the market's initial reaction was muted due to the revenue miss and cautious forward guidance. Fourth-quarter revenue of $767.9 million fell slightly short of the $768.3 million consensus estimate.
The company's focus on high-barrier coastal markets, particularly in California and the Northeast, has historically insulated it from some of the volatility affecting other multifamily operators. However, even these traditionally strong markets have faced pressure from new supply deliveries and moderating rent growth in recent quarters.
Wall Street maintains a generally positive view on AvalonBay, with an average price target of $200.32, according to analyst data compiled by MarketBeat. That represents roughly 13% upside from the current share price of around $178. The stock is rated a "Buy" by nine analysts, with 15 recommending "Hold" and none suggesting investors sell.
Despite the overall bullish sentiment, some firms have grown more cautious. Deutsche Bank downgraded the stock to "Hold" from "Buy" in January, while Truist Securities, RBC Capital, and UBS have all trimmed their price targets in recent weeks, citing concerns about near-term operating headwinds.
AvalonBay's dividend increase, while modest, continues the company's track record of reliable payout growth. The REIT now pays an annualized dividend of $7.12 per share, yielding approximately 4% at current prices. The company has increased its dividend for 17 consecutive years, reflecting its ability to generate steady cash flow across market cycles.
With a market capitalization of approximately $25 billion, AvalonBay is one of the largest publicly traded apartment REITs in the United States. The company owns or holds interests in 283 apartment communities containing approximately 85,000 apartment homes across 10 states and the District of Columbia, with a concentration in high-cost, high-barrier markets on the East and West Coasts.
Investors will be watching closely in coming months for signs that rental demand is stabilizing and whether AvalonBay's coastal focus can continue to outperform the broader multifamily sector. The company's next major catalyst will be first-quarter earnings, which are expected in late April or early May.