Prologis (PLD) hikes dividend by 5%, but other REITS are more attractive

Prologis’ (NYSE:PLD) dividend was increased by a solid 5%.  Its overall yield is 3.45%. The firm started paying a dividend in 2011.

Prologis is a large real estate investment trust, or REIT. It invests in the real estate markets across the globe. The firm engages in the ownership, development, management, and leasing of warehouse facilities and industrial distribution centers. The company is based in San Francisco, California and was founded in 1991.

Prologis has maintained a solid three-year growth rate of dividends of 10.2 percent. Prologis currently ranks 3rd in dividend yield within the large cap REIT-Industrial category. The quarterly dividend for the March payment will be $0.44 versus the prior year rate of $0.42 per share. Prologis is not a member  of our Top 100 Dividend Stocks.  (see below).

The dividend will be paid at the new higher rate on March 31, 2017, to shareholders of record at close of business on March 15, 2017. Prologis Inc. is currently priced at $54.05. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
3/15/2017 0.44
12/15/2016 0.42
9/15/2016 0.42
6/9/2016 0.42
3/16/2016 0.42
12/11/2015 0.4
9/16/2015 0.4
6/9/2015 0.36
3/16/2015 0.36
12/15/2014 0.33
9/17/2014 0.33
6/9/2014 0.33
3/10/2014 0.33
12/16/2013 0.28
9/12/2013 0.28
6/7/2013 0.28
3/8/2013 0.28
12/13/2012 0.28
9/12/2012 0.28
6/7/2012 0.28
3/8/2012 0.28
12/15/2011 0.28
9/15/2011 0.28
5/12/2011 0.28
2/10/2011 0.28
12/21/2010 0.28
10/1/2010 0.28
7/1/2010 0.28
3/31/2010 0.28


Analysis of Prologis is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 3.45% 101
Dividend Growth (3-6 year avg) 9.2% 227
Forward P/E 22.5 250
S&P Financial Rating A- 120
Beta 1.10 150
Total Score 848

Additional Information;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate FFO 2016 P/FFO Ratio 10 yr P/FFO Low 10 yr P/FFO High 5 yr low Yield % 5 yr max Yield %
3.45% 10.2%  8.1% 2.57 19.86  13.74 25.10 2.55% 3.87%

Final Analysis;

Positives;

  • Prologis’ dividend yield is above that of the S&P 500 Index.
  • Prologis has paid out a dividend consecutively for the past 6 years.
  • Prologis maintains an investment grade rating of A-.
  • Prologis has maintained a three-year growth rate of dividends of 10.2 percent.
  • Prologis’ current dividend yield (3.45%) is above its five-year average historical dividend yield.

Negatives;

  • Prologis maintains a beta of 1.10, higher than the average company.
  • Its strong price rise has increased its valuation versus REIT peers.

Latest Earnings & Overall Analysis:

Prologis issued its earnings data on January 21st. The company reported Q4 funds from operations (FFO) of $0.73 per share, exceeding the average consensus estimate of $0.70. For full-year 2016, FFO was $2.57 per share, in line with most estimates from analysts. Results were 15 percent higher than the year-ago figure. The REIT posted revenues of $620 million, also above estimates by about $20 million. Occupancy levels for properties in the portfolio were at 97.1%, up from last year.

For Q4, the REIT company initiated 39 million square feet of new leases in its managed portfolio.  Prologis’ share of building acquisitions were at $127 million while starts came in at $717 million.  The firm has a strong standing financially. The firm ended Q4 with $4 billion of liquidity while cash on board was $807 million.

Prologis provided core FFO per share guidance for full-year 2017. The company projects core FFO per share in the range of $2.60–$2.70.  Prologis is benefiting from strong demand for logistics infrastructure and distribution warehousing due to the internet sales boom.  The industrial real estate market is not doubt a strong growth area. Prologis indicated in March that overall rent growth in the industrial sector remained very strong as rental rates were a solid 4 percent.

Construction continues to grow, especially in the mega facility warehouse market. 39 million square feet of mega facilities is now under construction.  Growth will not doubt be driven by e-commerce, which entails additional space for warehousing.  The good thing for Prologis is that its facilities only account for less than 5 percent of the entire warehouse distribution space in the United States.

REITs within this space like Prologis have been strong performers.  The total return of the stocks in the unique segment of the REIT market is over 30 percent in the last twelve months.  Prologis stock has risen from $38 last February to over $54 today.  Most other REIT sector like healthcare, mall based, or storage have dramatically underperformed. Although Prologis is a strong company, it sits outside our top 100 list due to its valuation and lower historical yield.

Based on the firm’s relatively new dividend growth history and high beta, Prologis Inc. does not qualify as one of our Top 100 Dividend Stocks

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Prologis Inc. Dividend Yield Historical Chart (Click to enlarge)

pld4

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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