AFFO - Adjusted Funds From Operations — Smart Financial Analysis
Calculate AFFO for REIT analysis with FFO, AFFO per share, AFFO yield, AFFO margin, and payout safety. The true cash flow metric for REIT investors.
Why This Matters for Your Finances
Why: AFFO is the gold standard metric for REIT valuation. It represents the cash actually available for dividends after subtracting maintenance capital expenditures, leasing costs, a...
How: Enter Net Income, Depreciation, Amortization to get instant results. Try the preset examples to see how different scenarios affect the outcome, then adjust to match your situation.
- ●AFFO is the gold standard metric for REIT valuation.
- ●FFO adjusts net income for depreciation and gains on sales.
- ●AFFO = FFO - Maintenance CapEx - Leasing Costs + Straight-Line Rent Adjustments.
- ●A healthy AFFO payout ratio typically ranges from 70-85%.
AFFO Calculator — Gold Standard for REIT Valuation
Calculate FFO, AFFO, AFFO per share, AFFO yield, AFFO margin, and payout safety. NAREIT methodology.
📊 Sample REIT Scenarios — Click to Load
Income Statement
Adjustments
Recurring CapEx
Property Details
FFO to AFFO Waterfall
AFFO Trend Over Time
AFFO Payout Ratio
AFFO Comparison by Sector
⚠️For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
💡 Money Facts
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AFFO is the gold standard metric for REIT valuation — it's what's actually available for dividends after maintenance spending. AFFO = FFO - Maintenance CapEx - Leasing Costs + Straight-Line Rent Adjustments. While FFO ignores capital needs, AFFO accounts for the reality that buildings need ongoing investment. Realty Income (O) — the 'Monthly Dividend Company' — had AFFO of $4.01/share in 2023 with an 83% AFFO payout ratio, considered healthy. Payout ratios above 90% signal potential dividend cuts. The average REIT AFFO yield is 5-7%.
📋 Key Takeaways
- • AFFO = FFO - Maintenance Capex - Straight-Line Rent Adjustments
- • AFFO payout ratio = dividends / AFFO — above 100% is a red flag
- • REITs must distribute 90%+ of taxable income as dividends (IRC Section 856)
- • AFFO per share is the best way to value REITs (not P/E)
💡 Did You Know?
📖 How It Works
FFO vs AFFO
FFO adjusts net income for depreciation and gains on sales. AFFO goes further by subtracting maintenance capex and straight-line rent adjustments to show true distributable cash flow.
Maintenance Capex Adjustment
Recurring capital expenditures (tenant improvements, leasing commissions, building maintenance) reduce cash available for dividends. AFFO subtracts these to reflect real payout capacity.
Straight-Line Rent Adjustment
GAAP straight-lines rent over lease terms. AFFO adjusts for actual cash rent received to better reflect operating cash flow.
AFFO-Based Valuation (P/AFFO)
Price-to-AFFO is the preferred REIT valuation metric. Compare AFFO yield (AFFO/share ÷ price) to 10-year Treasury + spread — not P/E.
🎯 Expert Tips
⚠️ Payout Ratio Above 100%
REITs paying dividends above AFFO are unsustainable — a red flag for dividend cuts.
📈 Use AFFO per Share
Value REITs by AFFO yield, not P/E. Compare to 10-year Treasury + 3% spread.
📊 REIT AFFO Metrics
| REIT | AFFO/Share | Payout Ratio | AFFO Yield |
|---|---|---|---|
| Realty Income | $4.01 | 83% | 5.3% |
| Simon Property | $12.50 | 65% | 8.3% |
| Prologis | $5.20 | 70% | 4.2% |
| Welltower | $3.80 | 78% | 4.8% |
| Digital Realty | $6.40 | 60% | 3.5% |
❓ Frequently Asked Questions
What is AFFO (Adjusted Funds From Operations)?
AFFO is the gold standard metric for REIT valuation. It represents the cash actually available for dividends after subtracting maintenance capital expenditures, leasing costs, and adding straight-line rent adjustments. Unlike FFO, AFFO accounts for the reality that buildings need ongoing investment.
AFFO vs FFO: What is the difference?
FFO adjusts net income for depreciation and gains on sales. AFFO goes further by subtracting recurring capital expenditures (tenant improvements, leasing commissions, maintenance capex) to show true distributable cash flow. FFO ignores capital needs; AFFO reflects what is actually available for dividends.
What is the AFFO formula for REITs?
AFFO = FFO - Maintenance CapEx - Leasing Costs + Straight-Line Rent Adjustments. Some REITs also subtract tenant improvements and add back stock-based compensation. The exact formula varies by company, but the core is FFO minus recurring capital needs.
What is a healthy AFFO payout ratio?
A healthy AFFO payout ratio typically ranges from 70-85%. Realty Income's 83% is considered very safe. Ratios above 90% signal potential dividend cuts. Above 100% means the REIT is paying more in dividends than it generates in AFFO — unsustainable long-term.
How does AFFO affect REIT valuation?
AFFO is preferred for valuation as it reflects distributable cash flow. Compare AFFO yield (AFFO per share ÷ share price) to 10-year Treasury + 3% spread. Price-to-AFFO is the preferred REIT valuation metric, not P/E.
What is AFFO per share?
AFFO per share = AFFO ÷ Shares Outstanding. It shows the cash flow attributable to each share and is the best metric for valuing REITs. Realty Income had AFFO of $4.01/share in 2023. The average REIT AFFO yield is 5-7%.
📊 REIT Industry by the Numbers
📚 Sources
- • NAREIT — REIT industry standards & FFO/AFFO definitions
- • SEC EDGAR — REIT filings and supplements
- • S&P Global — REIT sector data and benchmarks
- • Green Street — Property-level AFFO analysis
⚠️ Disclaimer: This calculator provides estimates based on NAREIT methodology. Actual REIT AFFO calculations may vary by company. CapEx definitions differ across REITs. Not financial advice. Always verify with SEC filings and company supplements.