REITs (FFO and AFFO): what the metrics mean
Real estate trusts measure earnings their own way. Ordinary earnings are understated by building depreciation, so their valuation is built on FFO and AFFO.
Price / Rental Revenue (TTM) — price to rental revenue
The REIT version of Price / Sales: market cap divided by a year of rent payments. Shows how many years of rent the property portfolio is valued at.
P / AFFO (TTM) — price to AFFO
The main REIT multiple — their version of P/E. AFFO is FFO minus maintenance capital spending, i.e. the part of the cash the fund can really distribute to owners without eating into its properties.
In detail, with an example →P / AFFO (FWD) — the forward version
Price divided by next year's AFFO by analyst consensus.
P / FFO (TTM) — price to FFO
Price to “REIT earnings”: net income plus real estate depreciation minus gains on property sales. Buildings lose value on schedule in the accounts while in reality they appreciate — so an ordinary P/E overstates real estate funds, and this replaces it.
In detail, with an example →P / FFO (FWD) — the forward version
Price to next year's consensus FFO.
AFFO Growth (YoY) — AFFO growth over the year
Growth of the cash a REIT can distribute to owners without eating into its properties. For a real estate fund this is what EPS growth is for an ordinary company.
In detail, with an example →AFFO Growth (FWD) — expected AFFO growth
The AFFO growth analysts expect next year.
AFFO Growth (3Y CAGR) — AFFO growth over 3 years
The average annual AFFO growth rate over three years.
AFFO Growth (5Y CAGR) — AFFO growth over 5 years
The average annual AFFO growth rate over five years.
FFO Growth (YoY) — FFO growth over the year
Growth of “REIT earnings” year over year — before subtracting maintenance capital spending, which AFFO removes.
In detail, with an example →FFO Growth (FWD) — expected FFO growth
The FFO growth expected next year.
FFO Growth (3Y CAGR) — FFO growth over 3 years
The average annual FFO growth rate over three years.
FFO Growth (5Y CAGR) — FFO growth over 5 years
The average annual FFO growth rate over five years.
AFFO Payout Ratio (FWD) — share of AFFO paid as dividends, estimate
What part of future AFFO the fund intends to distribute. For a REIT this is the main test of whether the payout is sustainable: above 100%, the dividend is not covered by its own cash.
AFFO Payout Ratio (TTM) — share of AFFO paid as dividends
The same for the last twelve months, as actually reported rather than forecast.
AFFO / Total Revenue (TTM) — AFFO margin
What share of rental revenue reaches distributable cash after property upkeep, interest and maintenance capital spending.
AFFO Yield (TTM) — AFFO yield
AFFO per share divided by the price — the inverse of P / AFFO. Convenient to compare directly with bond yields: this is the annual percentage the fund earns on the price paid for it.
Dividend Yield to FAD Payout Ratio (TTM) — yield to FAD payout
FAD — funds available for distribution at a REIT, stricter still than AFFO. The ratio shows what yield each unit of burden on that cash turns into.
FAD Payout Ratio (TTM) — share of FAD paid as dividends
What part of the cash available for distribution goes to the payout. The strictest of the three dividend coverage tests for a REIT.
FFO Dividend Coverage Ratio (FWD) — dividend coverage, estimate
How many times the expected FFO covers the promised dividend. Below one — there is not enough for the payout even before capital spending.
FFO Dividend Coverage Ratio (TTM) — dividend coverage
The same for the last twelve months, as reported.
FFO To Gross Margin (TTM) — FFO to gross profit
What part of the fund's gross profit reaches FFO, i.e. survives administrative costs and interest on debt.
FFO Interest Coverage Ratio (TTM) — interest coverage from FFO
How many times FFO covers interest on debt. REITs carry large debt by the nature of the business, so this line matters more than for an ordinary company.
FFO Payout Ratio (FWD) — share of FFO paid as dividends, estimate
What part of expected FFO the dividend consumes. Softer than the AFFO version: maintenance capital spending is not subtracted yet.
FFO Payout Ratio (TTM) — share of FFO paid as dividends
The same, as reported for the last twelve months.
FFO / Total Revenue (TTM) — FFO margin
The share of revenue that reaches FFO. For a real estate fund this is the closest analogue of net margin.
FFO Yield (TTM) — FFO yield
FFO per share to the price — the inverse of P / FFO. Softer than AFFO Yield, because maintenance capital spending is not included.
Rents / Average Gross Properties (TTM) — rent to property value
How much rent a year each dollar invested in real estate at gross book value brings in. The yield of the property portfolio before the cost of maintaining it.