Apartment Investment and Management (AIV) versus American Campus Communities (ACC) Critical Analysis

Apartment Investment and Management (NYSE: AIV) and American Campus Communities (NYSE:ACC) are both mid-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Insider and Institutional Ownership

98.3% of Apartment Investment and Management shares are owned by institutional investors. 1.2% of Apartment Investment and Management shares are owned by company insiders. Comparatively, 0.7% of American Campus Communities shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Apartment Investment and Management and American Campus Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Apartment Investment and Management 21.36% 13.81% 3.45%
American Campus Communities 7.16% 1.58% 0.89%

Volatility & Risk

Apartment Investment and Management has a beta of 0.46, suggesting that its share price is 54% less volatile than the S&P 500. Comparatively, American Campus Communities has a beta of 0.27, suggesting that its share price is 73% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for Apartment Investment and Management and American Campus Communities, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Apartment Investment and Management 1 4 2 0 2.14
American Campus Communities 0 5 8 0 2.62

Apartment Investment and Management presently has a consensus target price of $47.57, indicating a potential upside of 7.80%. American Campus Communities has a consensus target price of $52.22, indicating a potential upside of 20.66%. Given American Campus Communities’ stronger consensus rating and higher probable upside, analysts clearly believe American Campus Communities is more favorable than Apartment Investment and Management.

Dividends

Apartment Investment and Management pays an annual dividend of $1.44 per share and has a dividend yield of 3.3%. American Campus Communities pays an annual dividend of $1.76 per share and has a dividend yield of 4.1%. Apartment Investment and Management pays out 109.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Campus Communities pays out 440.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apartment Investment and Management has raised its dividend for 4 consecutive years and American Campus Communities has raised its dividend for 6 consecutive years. American Campus Communities is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Apartment Investment and Management and American Campus Communities’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Apartment Investment and Management $995.85 million 6.96 $430.41 million $1.31 33.69
American Campus Communities $786.36 million 7.51 $99.06 million $0.40 108.20

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

Summary

Apartment Investment and Management beats American Campus Communities on 10 of the 17 factors compared between the two stocks.

Apartment Investment and Management Company Profile

Apartment Investment and Management Company (Aimco) is a self-administered and self-managed real estate investment trust (REIT). Aimco, through its subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, holds the ownership interests in the Aimco Operating Partnership. It operates through two segments: conventional real estate and affordable real estate. As of December 31, 2016, its real estate portfolio consisted of 189 apartment communities with 46,311 apartment homes. Aimco Operating Partnership conducts the Company’s business, which is focused on the ownership, management, redevelopment and limited development of apartment communities located in the coastal and job growth markets of the United States. Its Conventional segment consists of apartment communities it classifies as Conventional Same Store and Conventional Non-Same Store. Its affordable portfolio consists primarily of apartment communities that it manages that are owned through low-income housing tax credit partnerships.

American Campus Communities Company Profile

American Campus Communities, Inc. is a self-managed and self-administered equity real estate investment trust (REIT). The Company’s segments include Wholly-Owned Properties, On-Campus Participating Properties, Development Services, and Property Management Services. It is engaged in the acquisition, design, financing, development, construction management, leasing and management of student housing properties. The Wholly-Owned Properties segment consists of off-campus properties, which are located in close proximity to the school campus. The On-Campus Participating Properties segment includes on-campus properties that are operated under long-term ground/facility leases with three university systems. The Development Services segment consists of development and construction management services that it provides through one of its taxable REIT subsidiaries for third-party owners. The Property Management Services segment includes revenues generated from third-party management contracts.

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