Yahoo Finance Here's Why You Should Hold Prologis (PLD) Stock in Your Kitty
Prologis Inc. PLD is well-positioned to bank on the favorable industrial real estate market environment, backed by its solid operating platform and robust scale. The company, which has emerged as a market leader in this asset category, is witnessing the solid demand for its industrial real estate, as reflected by the leasing, rent and occupancy levels of the properties.
Undoubtedly, with the e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has risen. This is aiding the industrial real estate market to prosper and benefit Prologis, Terreno Realty Corporation TRNO and Rexford Industrial Realty, Inc. REXR.
Resilience is essential to the future supply chain. Therefore, over the long term, apart from the fast adoption of e-commerce, logistics real estate is expected to benefit from a likely increase in inventory levels, offering possibilities to industrial landlords, including Prologis, Terreno Realty and REXR, to enjoy a favorable market environment.
Prologis, in particular, has been witnessing a decent operating performance. The average occupancy level in PLD’s owned and managed portfolio was 97.7% in the third quarter.
Prologis’ share of the net effective rent change reached an all-time high of 59.7% in the July-September quarter, which was led by the United States at 67%. The cash rent change was 38.5%. Also, the cash same-store net operating income touched an all-time high and grew 9.3% in the third quarter, which was led by Europe at 10.6%.
With healthy operating fundamentals in industrial real estate markets, Prologis has capitalized on growth opportunities through acquisitions and developments. In October 2022, PLD closed the acquisition of Duke Realty in an all-stock transaction valued at $23 billion, including the assumption of debt, thereby boosting its presence in the key markets of the United States.
Its high number of build-to-suit development projects highlight the advantageous location of the company’s land bank. For 2022, the company anticipates building acquisitions at Prologis’ share between $1.9 billion and $2.1 billion, while development starts are expected in the range of $4.2-$4.6 billion.
Prologis is focused on bolstering its liquidity. This industrial REIT’s liquidity amounted to $5.3 billion in cash and availability on its credit facilities as of Sep 30, 2022. Given its balance-sheet strength and prudent financial management, PLD is well-poised to capitalize on growth opportunities.
Moreover, solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Prologis remains committed to that. In the last five years, Prologis has increased its dividend five times, and its five-year annualized dividend growth rate is 11.80%. Check Prologis’ dividend history here.
Shares of PLD have outperformed the industry it belongs to so far in the quarter. This Zacks Rank #3 (Hold) company’s shares have risen 12.8% compared with the industry’s increase of 5.6% during the same period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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However, with the asset category being attractive in these challenging times, there is a development boom in many markets. This high supply is likely to fuel competition and curb pricing power. New supply is likely to affect pressure on the vacancy level and rent growth to some extent in the upcoming quarters.
Moreover, a hike in the interest rate is a concern for Prologis. Rising rates imply higher borrowing costs for the company, affecting its ability to purchase or develop real estate. Further, the dividend payout might become less attractive than the yields on fixed income and money market accounts.
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Prologis, Inc. (PLD) : Free Stock Analysis Report
Terreno Realty Corporation (TRNO) : Free Stock Analysis Report
Rexford Industrial Realty, Inc. (REXR) : Free Stock Analysis Report
