Yahoo Finance Here's Why Cousins Properties (CUZ) is an Apt Portfolio Pick
Cousins Properties’ CUZ portfolio of class A office assets, concentrated in the high-growth markets in the Sun Belt region, positions it well to ride the growth curve amid the improving demand for premium office assets. Its capital-recycling efforts and a healthy balance sheet augur well.
Over the past six months, shares of this Atlanta, GA-based office real estate investment trust (REIT) have gained 15.6% compared with the industry's upside of 0.4%. Given the strength in its fundamentals, there seems to be additional room for growth of this stock.
Analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has been raised marginally over the past week to $2.63.
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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 strategically located office properties, as reflected by the rebound in new leasing volume. For the first quarter of 2024, it executed 37 leases for a total of 403,604 square feet of office space with a weighted average lease term of 7.1 years. This included 187,938 square feet of new leases, 117,165 square feet of renewal leases and 98,551 square feet of expansion leases. The company’s lease expirations through 2025 are among the lowest in the office sector.
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, it 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.
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. It makes strategic dispositions for a better portfolio mix.
During the pandemic, the company has recycled more than $1 billion of older assets, helping it shed the slow-growth assets from its portfolio and redeploy the proceeds for developing and acquiring highly differentiated amenitized properties in the Sun Belt submarkets.
In addition, its encouraging development pipeline is likely to deliver meaningful additional annualized net operating income in the upcoming years.
Balance Sheet Strength: Cousins Properties maintains a healthy balance sheet position and exited the first quarter of 2024 with cash and cash equivalents of $5.5 million. As of the same date, it had $292.2 million drawn under its $1 billion credit facility. With considerable liquidity and access to capital markets, 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 four times, and its five-year annualized dividend growth rate is 11%. Such efforts boost investors’ confidence in the stock. Check Cousins Properties’ dividend history here.
Given the company’s strong financial position, 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 Lamar Advertising LAMR and Rexford Industrial Realty REXR, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for LAMR’s 2024 FFO per share has moved 3.7% upward in the past month to $8.03.
The Zacks Consensus Estimate for REXR’s ongoing year’s FFO per share has increased marginally over the past two months to $2.34.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
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