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3 Industrial REITs At Bargain Prices

In Business
April 23, 2024
3 Industrial REITs At Bargain Prices

3 Industrial REITs At Bargain Prices

Although investors dislike pullbacks in the stock market, the ability to purchase quality stocks at bargain prices is a real advantage for those who have some money parked on the sidelines for such occasions.

With real estate investment trusts (REITs), one huge advantage of buying them on pullbacks is the increase in dividend yield you receive. Given the Federal Reserve’s recent higher-for-longer adjustment of interest rate cuts for 2024, many REITs have declined significantly in recent weeks and now seem too cheap to ignore.

Take a look at three industrial REITs selling at bargain prices, compared to where they were a few months ago. In addition, they are sporting dividend yields well above their five-year averages.

Prologis Inc. (NYSE:PLD) is a San Francisco-based industrial REIT that owns and manages approximately 1.2 billion square feet in 5,618 industrial logistics properties throughout the U.S. and 18 other countries. Prologis leases space and supplies equipment, robotics and other services to its customers.

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Founded in 1983, Prologis is the largest REIT with a market cap of $98.508 billion and has been a REIT stalwart for the last 26 years. It’s long been a leader in appreciation, with a 648.37% total return since January 2000.

On April 17, Prologis delivered its first quarter 2024 earnings. Core funders from operations (FFO) of $1.28 per share met the consensus estimate and was better than Prologis’s first-quarter 2023 FFO of $1.22 per share. Revenue of $1.828 billion missed the consensus estimate of $1.865 billion but topped first-quarter 2023 revenue of $1.634 billion.

The earnings weren’t bad, but a negative revision of full-year guidance triggered a selloff in Prologis shares by over 7%. Prologis reduced its full-year core FFO from $5.50-$5.64 to $5.45-$5.55 per share. Occupancy guidance of 96.5%-97.5% was reduced to 95.75%-96.75%.

About an hour after the announcement, Barclays analyst Brendan Lynch maintained Prologis at Overweight but lowered the price target from $141 to $135. On April 18, Evercore ISI Group analyst Steve Sakwa maintained Prologis at In-Line but lowered the price target from $136 to $123. UBS analyst Brent Dilts maintained Prologis with a Buy while lowering the price target from $151 to $138.

But Prologis shares, trading near $134 in mid-March, recently closed at $104.69, a level not seen since November. The dividend yield is now 3.41%, well above the five-year average of 2.35%. Wall Street’s reaction to the guidance revision was brutal and might be overdone. That allows investors to acquire Prologis with a much higher dividend yield than usual.

Rexford Industrial Realty Inc. (NYSE:REXR) is a Los Angeles-based industrial REIT that owns or manages 422 properties with 49 million square feet in Southern California’s high-growth areas. Rexford Industrial is a member of the S&P 400 and was founded in 2001.

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On April 16, Truist Securities analyst Anthony Hau maintained a Buy rating on Rexford Industrial Realty but lowered the price target from $57 to $53.

On April 17, Rexford Industrial Realty reported its first-quarter 2024 operating results. FFO of $0.58 per share beat the analyst consensus estimate of $0.57. Revenue of $210.99 million missed the consensus estimate of $211.56 million and was a 13.95% improvement over revenue in the first quarter of 2023 of $185.16 million.

Unlike Prologis, Rexford raised its fiscal 2024 core FFO of $2.27-$2.30 per share to $2.31-$2.34. Nevertheless, Wall Street was not impressed. Investors have the same fears about industrial REITs as they did about office REITs in 2023. However, industrial REITs such as Rexford continue to have occupancy rates far better than office REITs. Rexford announced a first-quarter occupancy rate of 96.8%.

Rexford was trading near $57 in mid-December but has since pulled back to a recent close of $43.19. The dividend yield of 3.87%, is well above its five-year average of 1.93%.

Americold Realty Trust Inc. (NYSE:COLD) is an Atlanta-based specialized industrial REIT that owns and operates temperature-controlled storage warehouses and services food producers and retailers who need cold storage. Americold has 245 locations across the U.S., Canada, Australia, New Zealand and Argentina. Americold has been in business for 120 years.

On March 26, Americold announced a 131,000-square-foot expansion to its existing facility in Russellville, Arkansas. The expansion will cost $90 million.

On March 27, Barclays analyst Anthony Powell maintained an Equal-Weight position on Americold but lowered the price target from $32 to $25. The same day, Scotiabank analyst Greg McGinniss initiated coverage on Americold with a Sector Perform rating and announced a $27 price target.

Americold has a present dividend yield of 3.87%, well above its five-year average of 2.68%. The price has declined about 25% from its January high of $30.32 to a recent close of $22.73. Americold will release its first-quarter earnings after the market closes on May 9.

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