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Here's Why You Should Retain Prologis (PLD) in Your Portfolio
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Prologis (PLD - Free Report) is well-poised to benefit from its portfolio of strategically located modern logistics facilities in some of the world’s busiest distribution markets. Strategic buyouts and development activities appear promising. A solid balance sheet aids its growth endeavors.
However, the choppiness in the industrial real estate market and subdued demand remain a concern for Prologis. Moreover, high borrowing expenses amid elevated interest rates add to its woes.
What’s Aiding PLD?
Prologis provides logistics real estate in some of the busiest distribution markets across the globe. The properties of the company are typically located in large, supply-constrained infill markets near airports, seaports and ground transportation facilities, which facilitates rapid distribution of customers’ products. The solid demand for Prologis’ strategically located facilities is a key driving force for its healthy operating performance.
Despite the slowdown in the industrial real estate market, the average occupancy level in Prologis’ owned and managed portfolio was 96.1% in the second quarter. For 2024, management has maintained its previous guidance range for average occupancy in the band of 95.75-96.75%.
Prologis continues to bolster its presence in high-barrier, high-growth markets through strategic acquisitions and development activities. Its investments over the years comprise a wide array, including the largest M&A transactions in the real estate sector and individual off-market deals below $5 million.
For 2024, the company anticipates acquisitions at Prologis share between $1.0 and $1.5 billion, up from its prior guided range of $500 million-$1.0 billion. Development starts are expected in the range of $2.5-$3.0 billion.
Prologis maintains a healthy balance sheet position with ample flexibility. As of Jun 30, 2024, this industrial REIT had a total available liquidity of $6.45 billion. The company's weighted average interest rate on its share of the total debt was 3.1%, with a weighted average term of 9.3 years.
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 14.31%. Given the company’s solid operating platform, opportunities for growth and decent financial position compared with the industry, this dividend rate is expected to be sustainable over the near term.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 19.1% compared with the industry's growth of 13.2%.
Image Source: Zacks Investment Research
What’s Hurting PLD?
In a volatile and persistently high interest rate environment and geopolitical concerns, customers remain focused on cost controls and delaying their decisions concerning decision-making for leasing. As such, demand remains subdued, and this trend is expected to continue in the near term.
Moreover, a high interest rate environment implies high borrowing costs for the company, affecting its ability to purchase or develop real estate. PLD’s consolidated debt as of Jun 30, 2024, was $29.9 billion. Further, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
The Zacks Consensus Estimate for Stag Industrial’s 2024 FFO per share has moved marginally northward over the past month to $2.39.
The Zacks Consensus Estimate for First Industrial Realty Trust’s current-year FFO per share has moved marginally northward over the past week 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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Here's Why You Should Retain Prologis (PLD) in Your Portfolio
Prologis (PLD - Free Report) is well-poised to benefit from its portfolio of strategically located modern logistics facilities in some of the world’s busiest distribution markets. Strategic buyouts and development activities appear promising. A solid balance sheet aids its growth endeavors.
However, the choppiness in the industrial real estate market and subdued demand remain a concern for Prologis. Moreover, high borrowing expenses amid elevated interest rates add to its woes.
What’s Aiding PLD?
Prologis provides logistics real estate in some of the busiest distribution markets across the globe. The properties of the company are typically located in large, supply-constrained infill markets near airports, seaports and ground transportation facilities, which facilitates rapid distribution of customers’ products. The solid demand for Prologis’ strategically located facilities is a key driving force for its healthy operating performance.
Despite the slowdown in the industrial real estate market, the average occupancy level in Prologis’ owned and managed portfolio was 96.1% in the second quarter. For 2024, management has maintained its previous guidance range for average occupancy in the band of 95.75-96.75%.
Prologis continues to bolster its presence in high-barrier, high-growth markets through strategic acquisitions and development activities. Its investments over the years comprise a wide array, including the largest M&A transactions in the real estate sector and individual off-market deals below $5 million.
For 2024, the company anticipates acquisitions at Prologis share between $1.0 and $1.5 billion, up from its prior guided range of $500 million-$1.0 billion. Development starts are expected in the range of $2.5-$3.0 billion.
Prologis maintains a healthy balance sheet position with ample flexibility. As of Jun 30, 2024, this industrial REIT had a total available liquidity of $6.45 billion. The company's weighted average interest rate on its share of the total debt was 3.1%, with a weighted average term of 9.3 years.
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 14.31%. Given the company’s solid operating platform, opportunities for growth and decent financial position compared with the industry, this dividend rate is expected to be sustainable over the near term.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 19.1% compared with the industry's growth of 13.2%.
Image Source: Zacks Investment Research
What’s Hurting PLD?
In a volatile and persistently high interest rate environment and geopolitical concerns, customers remain focused on cost controls and delaying their decisions concerning decision-making for leasing. As such, demand remains subdued, and this trend is expected to continue in the near term.
Moreover, a high interest rate environment implies high borrowing costs for the company, affecting its ability to purchase or develop real estate. PLD’s consolidated debt as of Jun 30, 2024, was $29.9 billion. Further, with high interest rates still in place, the dividend payout might seem less attractive than the yields on fixed-income and money market accounts.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Stag Industrial (STAG - Free Report) and First Industrial Realty Trust (FR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Stag Industrial’s 2024 FFO per share has moved marginally northward over the past month to $2.39.
The Zacks Consensus Estimate for First Industrial Realty Trust’s current-year FFO per share has moved marginally northward over the past week 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.