AvalonBay Communities (AVB) owns a portfolio of residential properties primarily in New England, the New York/New Jersey area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. The REIT should be able to benefit from favorable demographic trends, and strong market fundamentals in its major coastal markets. AvalonBay has done an excellent job of increasing its same-store net operating income margin since 2012. It also has a good track record of dividend growth in the past. The company’s shares are also slightly undervalued. We believe this is a good investment choice for investors seeking a stable and steadily growing dividend income. However, investors may want to apply a higher margin of safety especially because macroeconomic conditions are a bit uncertain at the moment.
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