Key Reasons to Add Cousins Properties (CUZ) to Your Portfolio
Cousins Properties CUZ owns an unmatched portfolio of class A office assets, concentrated in the high-growth markets in the Sun Belt region. With tenants’ growing preference for top-quality office spaces with class-apart amenities, this Atlanta, GA-based office real estate investment trust (REIT) seems well-poised to ride the growth curve.
In addition, its capital-recycling efforts and a robust balance sheet augur well for long-term growth.
Although shares of CUZ have lost 6.3% in the past six months, narrower than the industry’s fall of 10.5%, given the positive market trend, the company is expected to perform well in the quarters ahead. Hence, the dip marks a good entry point in the stock now.
Analysts, too, seem bullish on this Zacks Rank #1 (Strong Buy) company. The Zacks Consensus Estimate for its 2023 funds from operations (FFO) per share has been raised marginally over the past month to $2.62.
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Factors That Make Cousins Properties a Solid Pick
Rebounding Leasing Activity: Cousins Properties is witnessing healthy leasing demand for its highly-amenitized and well-placed office properties, as reflected by the rebound in new leasing volume. In the six months ended Jun 30, 2023, it executed 69 leases for a total of 693,330 square feet of office space with a weighted average term of 6.9 years. This included 501,806 square feet of new and expansion leases, denoting 72.4% of the total leasing activity.
Going forward, the next cycle of office-space demand will likely be driven by an inbound migration and significant investments announced by office-occupiers to expand the footprint in the Sun Belt regions. Hence, Cousins Properties’ leading trophy portfolio of class A and highly-amenitized office realties across the Sun Belt region is well-positioned to benefit from the emerging trend.
Further, the company is seeing a number of tenants returning to offices or announcing plans to report to workplaces. This is likely to support office market fundamentals in its markets.
Solid Tenant Base: The company enjoys a well-diversified, high-end tenant roster with less dependence on a single industry. This enables it to generate stable rental revenues over time. For 2023, we estimate the company’s rental property revenues to exhibit year-over-year growth of 7.1%.
Capital-Recycling Efforts: Cousins Properties capital-recycling moves to enhance its portfolio quality with trophy asset acquisitions and opportunistic developments in high-growth Sun Belt submarkets seem encouraging for long-term growth while preserving financial flexibility.
Notably, in the last two years, the company sold more than a billion worth of slow-growth assets and redeployed the proceeds for developing and acquiring highly differentiated amenitized properties in Austin, Nashville, Atlanta, Tampa and Charlotte.
In addition, its encouraging development pipeline is likely to deliver meaningful additional annualized net operating income in the upcoming years.
Balance Sheet Strength: This office REIT maintains a healthy balance sheet position and exited the second quarter of 2023 with cash and cash equivalents of $8 million. As of Jun 30, 2023, it had a borrowing capacity of $851.5 million under its $1 billion credit facility. With limited near-term debt maturities and ample financial flexibility, the company seems well-placed to bank on long-term growth opportunities.
Dividends: Solid dividend payouts are arguably the biggest enticement for REIT shareholders, and Cousins Properties has remained committed to that. In the last five years, the company has increased its dividend six times and its five-year annualized dividend growth rate is 18.73%. Such efforts boost investors’ confidence in the stock. Check Cousins Properties’ dividend history here.
Given the company’s strong financial position and a lower-than-industry dividend payout ratio, we expect its dividend payment to be sustainable in the upcoming period.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Welltower WELL, Boston Properties BXP and Vornado Realty Trust VNO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Welltower’s 2023 FFO per share has been revised marginally upward over the past month to $3.56.
The Zacks Consensus Estimate for Boston Properties’ ongoing year’s FFO per share has been increased marginally over the past month to $7.30.
The Zacks Consensus Estimate for Vornado Realty’s current-year FFO per share has moved 1.2% northward over the past month to $2.59.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Boston Properties, Inc. (BXP) : Free Stock Analysis Report
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Welltower Inc. (WELL) : Free Stock Analysis Report
