AFFO Calculator - Adjusted Funds From Operations for REITs
Free AFFO calculator to determine adjusted funds from operations for REIT investment analysis with dividend coverage metrics
AFFO Calculator
Results
What is an AFFO Calculator?
An AFFO calculator (Adjusted Funds From Operations calculator) is a REIT investment analysis tool that calculates a real estate investment trust's true cash-generating ability. AFFO adjusts FFO (Funds From Operations) by subtracting recurring capital expenditures and straight-line rent adjustments, providing investors with a more accurate measure of distributable cash flow available for dividend payments.
This calculator helps with:
- REIT analysis - Evaluate true cash flow and dividend sustainability
- Dividend assessment - Determine if dividends are covered by cash flow
- Investment decisions - Compare REITs using standardized metrics
- Yield calculations - Calculate AFFO yield for return analysis
- Performance tracking - Monitor REIT financial health over time
For comprehensive investment return analysis, use our ROI calculator to evaluate total profitability across real estate investments.
When analyzing real estate investments, explore our real estate calculator for complete property evaluation including cash flow and appreciation.
To evaluate overall investment performance, our investment calculator helps determine long-term growth and returns.
How AFFO Calculation Works
AFFO calculation adjusts FFO to reflect actual distributable cash flow:
Where:
- FFO = Funds From Operations (Net Income + Depreciation)
- Recurring CapEx = Ongoing maintenance and replacement costs
- Straight-line Rent = GAAP accounting adjustment for lease escalations
Additional Metrics:
AFFO Yield = (AFFO per Share ÷ Share Price) × 100
Payout Ratio = (Annual Dividend ÷ AFFO per Share) × 100
Example: A REIT with $10M FFO, $1.5M recurring CapEx, and $500K straight-line rent has AFFO = $10M - $1.5M - $500K = $8M. With 100M shares, AFFO per share = $0.08. At $50 share price, AFFO yield = 16%. If annual dividend is $3/share, payout ratio = 37.5%, indicating strong dividend coverage.
Key Concepts Explained
FFO (Funds From Operations)
Net income plus depreciation and amortization. Standard REIT metric that adds back non-cash charges to show operating performance.
Recurring CapEx
Ongoing maintenance capital expenditures needed to maintain properties. Excluded from FFO but critical for true cash flow assessment.
Straight-line Rent
GAAP accounting spreads lease escalations evenly. AFFO removes this non-cash adjustment to show actual cash collected.
Payout Ratio
Dividends as percentage of AFFO. Ratios over 90% may indicate unsustainable dividends; under 75% suggests room for increases.
How to Use This Calculator
Enter FFO
Input Funds From Operations from REIT financial statements (e.g., $10M)
Add Recurring CapEx
Enter recurring capital expenditures from supplemental disclosures
Include Rent Adjustments
Input straight-line rent adjustments to remove non-cash accounting items
Add Share Data (Optional)
Enter shares outstanding and price for per-share calculations and yields
Review Metrics
Analyze AFFO, yield, and payout ratio to assess dividend sustainability
Compare REITs
Use AFFO metrics to compare different REIT investment opportunities
Benefits of Using AFFO Calculator
- • Dividend Sustainability Analysis: Assess whether REIT dividends are covered by actual cash flow, identifying unsustainable payout policies early.
- • True Cash Flow Measurement: Remove non-cash accounting items and account for necessary CapEx to see real distributable cash.
- • Investment Comparison: Compare REITs using standardized AFFO metrics across different property types and management strategies.
- • Yield Accuracy: Calculate yields based on actual cash generation rather than accounting metrics like FFO or net income.
- • Risk Assessment: Identify REITs with low AFFO coverage indicating potential dividend cuts or financial stress.
- • Growth Potential: Low payout ratios based on AFFO suggest room for dividend increases and sustainable growth.
Factors That Affect AFFO Results
1. Property Type & Age
Older properties require higher recurring CapEx, reducing AFFO. Industrial/self-storage typically need less maintenance than retail or office properties.
2. Lease Structures
Long-term leases with escalations create larger straight-line rent adjustments. Triple-net leases shift CapEx to tenants, improving AFFO.
3. Management Quality
Efficient property management reduces maintenance costs and improves CapEx efficiency, increasing AFFO relative to FFO.
4. Growth Stage
Growth-focused REITs may temporarily reduce dividends below AFFO to fund acquisitions, while mature REITs typically pay out most AFFO.
5. Economic Conditions
Recessions increase tenant defaults and vacancy, reducing FFO and AFFO. Strong economies boost occupancy and rental rates.
Frequently Asked Questions (FAQ)
Q: What is AFFO in REIT investing?
A: AFFO (Adjusted Funds From Operations) adjusts FFO for recurring CapEx and straight-line rent, showing true cash-generating ability and dividend sustainability.
Q: How is AFFO different from FFO?
A: FFO adds back depreciation to net income. AFFO further subtracts recurring CapEx and straight-line rent adjustments for truer distributable cash flow.
Q: Why is AFFO important for REIT investors?
A: AFFO shows actual cash available for dividends after necessary capital improvements. Dividends exceeding AFFO may be unsustainable.
Q: What is a good AFFO payout ratio?
A: Healthy ratio: 75-85%. Below 75% suggests room for increases; above 90% may indicate unsustainable dividends. Compare within same REIT sector.
Q: How do you calculate AFFO yield?
A: AFFO yield = (AFFO per share ÷ Share price) × 100. Shows cash return percentage. Compare with dividend yield to assess sustainability.
Q: Where can I find AFFO data for REITs?
A: Check REIT supplemental financial disclosures, investor presentations, or earnings reports. Most REITs report AFFO alongside FFO quarterly.