Reviewing AvalonBay Communities (AVB) & HCP (HCP)

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

Institutional and Insider Ownership

93.1% of AvalonBay Communities shares are held by institutional investors. Comparatively, 88.3% of HCP shares are held by institutional investors. 0.4% of AvalonBay Communities shares are held by company insiders. Comparatively, 0.1% of HCP shares are held 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.

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AvalonBay Communities 1 12 8 0 2.33
HCP 2 10 4 0 2.13

AvalonBay Communities currently has a consensus price target of $192.50, indicating a potential upside of 3.95%. HCP has a consensus price target of $26.46, indicating a potential upside of 0.28%. Given AvalonBay Communities’ stronger consensus rating and higher possible upside, analysts clearly believe AvalonBay Communities is more favorable than HCP.

Profitability

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

Net Margins Return on Equity Return on Assets
AvalonBay Communities 39.01% 8.42% 4.72%
HCP 3.39% 1.12% 0.45%

Valuation & Earnings

This table compares AvalonBay Communities and HCP’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AvalonBay Communities $2.16 billion 11.86 $876.92 million $8.62 21.48
HCP $1.85 billion 6.71 $414.16 million $1.95 13.53

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

Dividends

AvalonBay Communities pays an annual dividend of $5.88 per share and has a dividend yield of 3.2%. HCP pays an annual dividend of $1.48 per share and has a dividend yield of 5.6%. AvalonBay Communities pays out 68.2% of its earnings in the form of a dividend. HCP pays out 75.9% 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 has raised its dividend for 6 consecutive years.

Risk & Volatility

AvalonBay Communities has a beta of 0.33, suggesting that its stock price is 67% less volatile than the S&P 500. Comparatively, HCP has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500.

Summary

AvalonBay Communities beats HCP on 16 of the 17 factors compared between the two stocks.

AvalonBay Communities Company Profile

As of June 30, 2018, the Company owned or held a direct or indirect ownership interest in 287 apartment communities containing 84,043 apartment homes in 12 states and the District of Columbia, of which 19 communities were under development and 16 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. As of June 30, 2018, the Company owned or held a direct or indirect ownership interest in 287 apartment communities containing 84,043 apartment homes in 12 states and the District of Columbia, of which 19 communities were under development and 16 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. More information may be found on the Company's website at http://www.avalonbay.com.

HCP Company Profile

HCP, Inc. is a fully integrated real estate investment trust (REIT) that invests in real estate serving the healthcare industry in the United States. HCP owns a large-scale portfolio primarily diversified across life science, medical office and senior housing. Recognized as a global leader in sustainability, HCP has been a publicly-traded company since 1985 and was the first healthcare REIT selected to the S&P 500 index.

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