3 Top Industrial REITs to Add to Your Dividend Portfolio
Amid the current uncertain market conditions, we think it could be wise to bet on fundamentally sound industrial REITs to ensure a steady portfolio income stream because regulations require REITs...
Amid the current uncertain market conditions, we think it could be wise to bet on fundamentally sound industrial REITs to ensure a steady portfolio income stream because regulations require REITs to distribute most of their income as dividends. So, given the promising growth prospects of the industrial sector, it could be wise to bet on quality industrial REITs Prologis (PLD), Public Storage (PSA), and Industrial Logistics Properties (ILPT). Read on.
Industrial REITs own, maintain, and manage properties that are pivotal to the industrial sector. They are well known for their focus on warehouses, manufacturing, and distribution centers, as manufacturers and logistics companies focus on their core businesses and leave last-mile delivery and distribution to specialist operations. Given the industrial sector's solid growth prospects this year, industrial REITs should perform well.
Because the Fed is expected to raise interest rates aggressively this year, the REITs' dependence on debt could become a concern. However, many REITs have managed to deleverage their balance sheets and are well-positioned to survive a high-interest-rate environment. On the other hand, industrial REITs should benefit from rising real estate rents and property values due to surging inflation. This should help them increase their dividends. REIT dividends have outpaced inflation in all but two of the last 20 years as measured by the Consumer Price Index. Also, investors' interest in industrial REITs is evident in the Pacer Benchmark Industrial Real Estate SCTR ETF's (INDS) 33.6% returns over the past year.
Given this backdrop, we think investors looking to generate steady dividend income could add quality industrial REITs Prologis, Inc. (PLD), Public Storage (PSA), and Industrial Logistics Properties Trust (ILPT) to their portfolios.
Prologis, Inc. (PLD)
PLD in San Francisco is a real estate investment trust (REIT) company. It is involved in the logistics real estate business. The company owns, acquires, develops, and manages logistics. It invests in real estate and other entities through which it co-invests with partners and investors. Its segments include Real Estate Operations and Strategic Capital.
PLD's dividend payouts have grown at a 9.4% CAGR over the last three years. Its four-year average dividend yield is 2.4%, and its current dividend translates to a 2.1% yield.
PLD's total revenues increased 14.9% year-over-year to $1.27 billion for the fourth quarter, ended Dec. 31, 2021. The company's adjusted net earnings attributable to common shareholders increased 344.9% year-over-year to $1.28 billion. Also, its EPS came in at $1.67, representing a 339.4% increase year-over-year. In addition, its adjusted EBITDA increased 38.1% year-over-year to $1.33 billion.
Analysts expect PLD's EPS for its fiscal year 2023 to increase 14.8% year-over-year to $3.11. Its revenue for the quarter ending June 30, 2022, is expected to increase 10.1% year-over-year to $1.12 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 55.6% in price to close the last trading session at $149.58.
PLD's strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Sentiment and a B grade for Growth, Momentum, and Stability. It is ranked #2 of 20 stocks in the REITs – Industrial industry. Click here to see the other ratings of PLD for Value and Quality.
Public Storage (PSA)
PSA's principal business activities include the ownership and operation of self-storage facilities that offer storage spaces for lease, generally on a month-to-month basis, for personal and business use, ancillary activities, such as merchandise sales and tenant reinsurance to the tenants, as well as acquisition and development of additional self-storage space. PSA is headquartered in Glendale, Calif.
On Nov. 1, 2021, PSA announced the acquisition of All-Storage. The All-Storage portfolio comprises 56 self-storage properties located mainly in the Dallas-Fort Worth market. PSA's CEO Joe Russell said, "The acquisition is a direct reflection of how the team at Public Storage is committed to driving growth through our four-factor platform, which includes acquisitions, development, redevelopment, and third-party management."
PSA's four-year average dividend yield is 3.4%, and its current dividend translates to a 2.2% yield.
PSA's revenues increased 23.4% year-over-year to $924.31 million for the fourth quarter, ended Dec. 31, 2021. The company's net income increased 91% year-over-year to $558.05 million. Also, its EPS came in at $3.17, representing an 89.8% increase year-over-year.
For the quarter ending June 30, 2022, PSA's EPS is expected to increase 25.9% year-over-year to $2.48. Its revenue for the quarter ending March 31, 2022, is expected to increase 26.1% year-over-year to $967.85 million. And it surpassed the Street's EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 61.5% to close the last trading session at $372.96.
PSA's POWR Ratings reflect this promising outlook. It has an A grade for Sentiment and a B grade for Momentum and Stability.
Industrial Logistics Properties Trust (ILPT)
ILPT is a real estate investment trust. The Newton, Mass., company owns and leases distribution and logistics properties throughout the United States that serve the needs of e-commerce. It operates in the ownership and leasing of properties segment, including industrial and logistics buildings, and leased industrial lands.
ILPT announced that it had completed the acquisition of Monmouth Real Estate Investment Corporation on Feb.28, 2022. The acquisition of e-commerce properties enhances ILPT's scale and increases its tenant and geographic diversity. It also enables ILPT to expand its portfolio and exposure in strategic markets.
ILPT's dividend payouts have grown at a 10% CAGR over the last three years. Its four-year average dividend yield is 5.2%, and its current dividend translates to a 5.9% yield.
ILPT's total expenses declined 8.2% year-over-year to $30.61 million for the fourth quarter, ended Dec. 31, 2021. The company's net income attributable to common shareholders increased 56.7% year-over-year to $63.20 million. Also, its EPS came in at $0.97, representing a 56.4% increase year-over-year.
Analysts expect ILPT's EPS for its fiscal year 2023 to increase 4.5% year-over-year to $1.15. The company's revenue for its fiscal 2022 is expected to increase 7.7% year-over-year to $236.82 million. Over the past year, the stock has gained 4.3% in price to close the last trading session at $22.57.
ILPT's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
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PLD shares were unchanged in premarket trading Friday. Year-to-date, PLD has declined -11.15%, versus a -9.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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