Recently, Prologis Inc. 's PLD board approved a 9% hike in its annualized dividend rate to $1.92 from the $1.76 paid earlier. As a result, the company will now pay 48 cents per share as against 44 cents paid in the prior quarter.
The new dividend will be paid on Mar 29 to shareholders of record on Mar 15, 2018. Based on this hiked value, annualized yield comes in at about 3.2%, considering Prologis' closing price of $59.94 on Feb 22.
We believe Prologis has an adequate capacity to support its dividend policy. Last month, the company reported decent fourth-quarter 2017 core funds from operations (FFO). It experienced solid operating results and higher net promote income. Net effective rent change improved in the quarter, while period-end occupancy also remained at a record high.
Notably, the industrial real estate market has been enjoying elevated demand for logistics infrastructure amid an e-commerce boom, recovering economy and job market, as well as healthy manufacturing environment. This has been providing Prologis ample scope to tap growth opportunities.
In addition, Prologis' build-to-suit activity remained solid in 2017. The company completed 33 build-to-suit projects, covering more than 12 million square feet of space, in the year. It also started 38 projects, which have a total expected investment of nearly $1.1 billion, in 2017. Furthermore, the company's ratio of built-to-suit activity to overall development starts achieved the highest level since 2013. This high number of build-to-suit development projects highlights the advantageous location of the company's rich land bank and the robust network of multi-site customers which is increasingly focusing on e-commerce.
Prologis is also focused on bolstering its liquidity. The company continues to have significant liquidity of $3.6 billion. In addition, for the full year, the company reported a 340-basis-point contraction in leverage to 23.7% on a market capitalization basis and debt-to-adjusted EBITDA improved around 0.2x-4.6x. Given its balance-sheet strength and prudent financial management, the company remains well poised to capitalize on growth opportunities and reward shareholders accordingly.
However, a whole lot of new buildings are slated to be completed and made available in the market in the near term, leading to higher supply, and lesser scope for rent and occupancy growth. Also, rate hikes have added to the company's woes.
Prologis currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
The stock has dropped 10.6% in the past three months, outperforming the 12.5% loss incurred by the industry it belongs to.
Solid dividend payouts remain arguably the biggest enticement for REIT investors. Apart from Prologis, some other REITs which announced dividend hikes in recent months include Simon Property Group, Inc. SPG , AvalonBay Communities, Inc. AVB and Realty Income Corporation O .
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) - a widely used metric to gauge the performance of REITs.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.