On Mar 25, 2014, we issued an updated research report on industrial real estate investment trust (:REIT), Prologis Inc. (PLD).
On Jan 30, Prologis reported its fourth-quarter 2013 financial results. The company’s core FFO per share of 43 cents in the fourth quarter was a penny ahead of both the Zacks Consensus Estimate and the year-ago quarter figure. Though total revenue declined from the year-ago quarter, it managed to beat the Zacks Consensus Estimate.
Furthermore, in February, the company ushered in good news for its shareholders by announcing an 18% increase in its quarterly dividend rate to 33 cents per share. With its capacity to offer modern distribution facilities in strategic infill locations around the globe, Prologis stands to benefit from the demand supply imbalance. In fact, efficiencies from enhanced scale, development initiatives and recovering rents set the ground for growth for this REIT.
However, with the Fed tapering its stimulus program, interest rates are expected to rise in the long term. This is a growing concern as it would adversely affect the company’s financing costs, its margin and FFO. This in turn has the capacity to negatively impact the company’s dividend payout, which we believe is arguably one of the most important attractions of investing in REITs. Moreover, competition is intensifying and economic growth is not yet robust, thus not making us overtly optimistic on the stock.
Over the last 30 days, the Zacks Consensus Estimate for FFO per share has remained stable at $1.77 for 2014 and $1.95 for 2015. The stock currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Investors interested in REIT industry may consider stocks like Cousins Properties Inc. (CUZ), Public Storage (PSA) and STAG Industrial, Inc. (STAG). All these stocks have a Zacks Rank #2 (Buy).
Note:FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.