π’ AFFO Calculator
The REIT dividend-safety metric, from FFO to payout ratio.
Adjusted funds from operations per share
Estimates for planning only, not financial advice.
AFFO, adjusted funds from operations, is the cash-flow number REIT investors actually underwrite: FFO minus the recurring capital expenditures needed to keep properties leasable. A REIT reporting $4.20 per share of FFO with $0.65 of recurring capex has AFFO of $3.55 per share. Against a $2.80 dividend, the AFFO payout ratio is 78.9 percent, a healthy cushion. When the payout ratio pushes past 90 percent and stays there, the dividend is living on borrowed time.
How to Use This Calculator
Enter FFO per share (from the REIT's earnings release), recurring maintenance capex per share (same source, sometimes labeled "recurring capital expenditures"), and the annual dividend per share. The calculator produces AFFO per share, the AFFO payout ratio, the FFO payout ratio for comparison, and a dividend-safety reading.
Find FFO per share in the quarterly earnings release or supplemental package. Use diluted shares to match the dividend math.
Enter recurring capex per share. If the REIT reports total recurring capex in dollars, divide by diluted shares yourself.
Read the AFFO payout ratio as your dividend-safety gauge, and check the trend over four to eight quarters, not just one. For portfolio-level income planning, our retirement savings calculator models what the dividends compound into.
The Formula Chain
Each step strips away something that is not recurring cash. Net income includes massive depreciation charges on buildings that are often appreciating, so FFO adds it back. FFO still ignores the very real cash spent on roofs and HVAC, so AFFO subtracts it. What remains is the closest public number to "cash the REIT could sustainably hand shareholders," which is why the payout ratio built on AFFO, not earnings, is the dividend-safety standard.
Worked Example: $4.20 FFO, $2.80 Dividend
FFO per share: $4.20. Recurring capex per share: $0.65. AFFO = $4.20 - $0.65 = $3.55 per share. Annual dividend: $2.80. AFFO payout ratio = $2.80 / $3.55 = 78.9 percent. FFO payout ratio = $2.80 / $4.20 = 66.7 percent. The 12-point gap between the two ratios is the maintenance burden: about 15 percent of FFO goes back into the properties before shareholders see a dollar.
Stress it: if recurring capex rises to $1.10 (an aging portfolio), AFFO falls to $3.10 and the payout ratio climbs to 90.3 percent, the edge of the comfort zone. If the dividend were $3.40 instead, the payout would be 95.8 percent on the original numbers, a dividend one bad quarter away from a cut. This is why yield-chasers get hurt: the $3.40 dividend looks generous until the ratio reveals it is fragile.
Reading the Payout Ratio
| AFFO payout ratio | Reading | Typical REITs |
|---|---|---|
| Under 75% | Comfortable | Room to grow the dividend |
| 75% to 90% | Normal | Most large REITs live here |
| 90% to 100% | Tight | Watch AFFO trend closely |
| Over 100% | Unsustainable | Cut likely unless AFFO rebounds |
Two caveats. First, compare within property type: triple-net lease REITs structurally run lower capex and lower payout ratios than hotels or offices, so cross-sector comparisons mislead. Second, one quarter over 100 percent after an acquisition or a big redevelopment spend is noise; four quarters over 100 percent is a signal. Always read the ratio as a trend, never as a snapshot.
Where AFFO Can Mislead
AFFO's weak point is the recurring capex input, which management estimates and which has no NAREIT standard. Aggressive classification of maintenance as growth capex flatters AFFO, and straight-line rent adjustments (smoothing contractual rent bumps) add non-cash income back in some definitions. Cross-check capex against revenue: if a REIT's recurring capex runs 5 percent of revenue while peers run 12 percent on similar properties, the AFFO is probably overstated, not the properties better maintained.
Use AFFO as the core of REIT analysis, not the whole of it: pair it with debt metrics (debt to EBITDA, interest coverage), occupancy trends, and lease-expiration schedules. A safe payout ratio on a REIT with 40 percent of leases expiring into a weak market is safety on paper. For the income side of your own plan, our compound interest calculator shows what reinvested REIT dividends become over decades, which is where the asset class earns its keep.
The AFFO Payout Ratio: Dividend Safety
Divide dividends per share by AFFO per share and you get the payout ratio that actually matters for REITs. Under 75 percent is comfortable, 75 to 90 percent is full but sustainable for stable property types, and persistently above 90 percent means the dividend is living on borrowed time or asset sales. When a REIT cuts its dividend, this ratio almost always told the story quarters in advance.
Compare payout ratios within property types, not across them. Triple-net lease REITs with minimal capex can sustain higher payouts than apartment or office REITs with constant turnover costs. Also watch the trend in recurring capex itself: a REIT whose maintenance spending keeps rising as a share of NOI is fighting obsolescence, and its AFFO will erode even if occupancy looks fine. The dividend is only as safe as the AFFO behind it, and the AFFO is only as honest as the capex deductions.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is AFFO?
Adjusted funds from operations is a REIT cash-flow measure: FFO (funds from operations) minus recurring capital expenditures. A REIT with $4.20 per share of FFO and $0.65 of recurring capex has AFFO of $3.55 per share. It approximates the cash a REIT actually has available to pay dividends after keeping its properties competitive.
What is the AFFO formula?
AFFO = FFO - recurring capital expenditures, sometimes with adjustments for straight-line rent and other non-cash items. FFO itself starts from GAAP net income, adds back real estate depreciation, and removes gains on property sales. Each subtraction moves closer to true recurring cash flow, which is what dividend safety depends on.
Why do REIT investors use AFFO instead of earnings?
Because GAAP net income punishes REITs unfairly and flatters them misleadingly at the same time. Real estate depreciation is a huge non-cash charge that understates cash generation, while property sale gains overstate recurring income. FFO fixes the first problem, AFFO fixes the second by subtracting the real cash spent maintaining properties. Earnings per share is nearly useless for REITs; AFFO per share is the number.
What is a good AFFO payout ratio?
The AFFO payout ratio is dividends per share divided by AFFO per share. Under 75 percent is comfortable, 75 to 90 percent is normal for many REITs, and sustained ratios over 90 to 100 percent mean the dividend is funded by hope, asset sales, or debt rather than operations. Our example: $2.80 dividend on $3.55 AFFO is a 78.9 percent payout, healthy with a cushion.
What is the difference between FFO and AFFO?
FFO adds back depreciation and excludes sale gains, giving operating performance before maintenance spending. AFFO goes one step further and subtracts recurring capex: the roofs, HVAC systems, parking lots, and tenant improvements needed to keep properties leasable. FFO answers "how did operations do"; AFFO answers "what cash is really left for shareholders."
What counts as recurring capex?
Spending required to maintain existing rental income: roof replacements, HVAC, parking lot resurfacing, lobbies and common areas, and routine tenant improvements. It excludes growth capex like new developments and acquisitions, which create new income rather than defending old income. The recurring vs growth split involves judgment, which is why AFFO definitions vary slightly between REITs.
Can AFFO be manipulated?
The weak point is the recurring capex estimate, which management provides and which is not standardized. A REIT that understates maintenance capex flatters its AFFO; one that classifies maintenance as growth capex does the same. Compare capex as a share of revenue across peers and watch for AFFO that grows while properties visibly age.
How does AFFO relate to the dividend yield?
Yield tells you the income rate; the AFFO payout ratio tells you whether the yield survives. A 9 percent yield at a 70 percent AFFO payout is safer than a 6 percent yield at a 105 percent payout. Chasing yield without checking the payout ratio is the classic REIT mistake, and dividend cuts usually arrive together with a falling share price.
Do all REITs report AFFO?
Most do, but there is no single GAAP-style standard: names vary (AFFO, CAD for cash available for distribution, FAD for funds available for distribution) and adjustments differ. NAREIT standardizes FFO but not AFFO. When comparing REITs, check that both use recurring capex the same way, or the comparison is apples to oranges.
What AFFO growth should I expect?
Quality REITs grow AFFO per share in the low to mid single digits annually through rent escalations, occupancy gains, and developments. Faster growth usually means acquisitions or development pipelines, which add risk. Declining AFFO per share with a maintained dividend is the warning pattern: the payout ratio is rising toward the danger zone.