Head to Head Survey: MFA Financial (NYSE:MFA) and AvalonBay Communities (NYSE:AVB)

AvalonBay Communities (NYSE:AVB) and MFA Financial (NYSE:MFA) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, earnings, analyst recommendations, institutional ownership and profitability.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for AvalonBay Communities and MFA Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AvalonBay Communities	0	11	7	0	2.39
MFA Financial	0	1	4	0	2.80

AvalonBay Communities presently has a consensus price target of $226.88, suggesting a potential downside of 1.11%. MFA Financial has a consensus price target of $13.60, suggesting a potential upside of 23.30%. Given MFA Financial’s stronger consensus rating and higher probable upside, analysts clearly believe MFA Financial is more favorable than AvalonBay Communities.

Dividends

AvalonBay Communities pays an annual dividend of $6.80 per share and has a dividend yield of 3.0%. MFA Financial pays an annual dividend of $1.40 per share and has a dividend yield of 12.7%. AvalonBay Communities pays out 93.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MFA Financial pays out 88.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MFA Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares AvalonBay Communities and MFA Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AvalonBay Communities	$2.77 billion	11.79	$928.83 million	$7.31	31.38
MFA Financial	$605.60 million	1.86	$80.16 million	$1.59	6.94

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

Volatility and Risk

AvalonBay Communities has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500. Comparatively, MFA Financial has a beta of 2.16, meaning that its stock price is 116% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
AvalonBay Communities	36.20%	8.84%	4.98%
MFA Financial	28.38%	9.97%	1.71%

Insider and Institutional Ownership

92.6% of AvalonBay Communities shares are owned by institutional investors. Comparatively, 65.3% of MFA Financial shares are owned by institutional investors. 0.4% of AvalonBay Communities shares are owned by insiders. Comparatively, 0.7% of MFA Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

AvalonBay Communities beats MFA Financial on 9 of the 16 factors compared between the two stocks.

About AvalonBay Communities

As of December 31, 2023, the Company owned or held a direct or indirect ownership interest in 299 apartment communities containing 90,669 apartment homes in 12 states and the District of Columbia, of which 18 communities were under development. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company's expansion regions of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado.

About MFA Financial

MFA Financial, Inc., together with its subsidiaries, operates as a real estate investment trust in the United States. It invests in residential mortgage securities, including non-agency mortgage-backed securities, agency MBS, and credit risk transfer securities; residential whole loans, including purchased performing loans, purchased credit deteriorated, and non-performing loans; and mortgage servicing rights related assets. The company was incorporated in 1997 and is based in New York, New York.