Boosting shareholders’ wealth, Prologis, Inc. PLD announced a 5% hike in its quarterly cash dividend to $1.01 per share from 96 cents paid out in the prior quarter. The increased dividend will be paid out on March 31 to its shareholders of record as of March 18, 2025.

The latest dividend rate marks an annualized amount of $4.04 per share compared with the prior rate of $3.84. Based on the company’s share price of $120.90 on Feb. 20, the latest hike results in a dividend yield of 3.3%.

Solid dividend payouts are the biggest enticements for real estate investment trust (REIT) investors and Prologis remains committed to that. In February 2024, the company’s board hiked its quarterly dividend by 10.3% to 96 cents per share. Moreover, Prologis increased its dividend five times in the last five years and has a five-year annualized dividend growth rate of 13.66%. Check Prologis’ dividend history here.

Is Prologis’ Latest Dividend Hike Sustainable?

Prologis provides industrial distribution warehouse space in some of the busiest distribution markets worldwide. The properties of the company are typically located in large, supply-constrained infill markets in close proximity to airports, seaports and ground transportation facilities, which facilitates rapid distribution of customers’ products. Prologis’ strategically located facilities and its ability to generate sufficient cash flow through its operating platform are reflected in the latest hike. The company also focuses on seizing the opportunities created by favorable trends in data center and energy businesses.

In the fourth quarter of 2024, 46.5 million square feet of leases commenced in the company’s owned and managed portfolio. The retention level was 78.4% in the quarter. Despite the slowdown in the industrial real estate market, the average occupancy level in Prologis’ owned and managed portfolio was 95.6% in the fourth quarter. For 2025, management has issued its guidance range for average occupancy in the band of 94.5-95.5%. We estimate occupancy to be 94.9%. 

Following the U.S. elections, leasing activity in the company’s portfolio has been strong, and the pipeline for 2025 has started at healthy levels. It expects a decline in vacancy over this year, which will pave the way for rent growth. The company’s new and renewal leases are expected to translate into considerable rises in future rental income. Our estimate points to a year-over-year increase of 6.9% in rental revenues in 2025. For 2026 and 2027, the metric is expected to witness growth of 6.9% and 8.3%, respectively.

On the balance sheet front, Prologis maintains a healthy balance sheet position with ample flexibility. As of Dec. 31, 2024, this industrial REIT had a total available liquidity of $7.38 billion. As of the same date, the company's weighted average interest rate on its share of the total debt was 3.2%, with a weighted average term of 9.0 years. Debt, as a percentage of the total market capitalization, was 25.6% as of Dec. 31, 2024, while debt to adjusted EBITDA was 4.6x. 

In addition, the company’s credit ratings as of Dec. 31, 2024, were A3 (Outlook Positive) from Moody’s and A (Outlook Stable) from Standard & Poor’s, enabling the company to borrow at an advantageous rate. Given its balance sheet strength and prudent financial management, as well as investment capacity in co-investment ventures, the company is well-poised to capitalize on long-term growth opportunities.

Conclusion

With ample financial flexibility, the company remains well-poised to respond to any challenges and bank on growth opportunities. Moreover, with a solid operating platform, opportunities for growth and a decent financial position compared with the industry, we expect the latest dividend rate to be sustainable.

Shares of this Zacks Rank #3 (Hold) company have gained 4.4% over the past three months against the industry’s decline of 4.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Reliable dividend payouts are perhaps the most attractive feature for REIT investors. Apart from Prologis, some other REITs that announced dividend hikes recently are Essex Property Trust, Inc. ESS and Realty Income Corporation O. 

Essex Property Trust’s board of directors has approved a 4.9% increase to its annual cash dividend, declaring a first-quarter dividend of $2.57 per share, which is payable on April 15, 2025, to its shareholders of record as of March 31, 2025. This marked the company’s 31st consecutive annual dividend increase. 

Realty Income declared a hike of 1.5% in the company's common stock monthly cash dividend to 26.8 cents per share from 26.4 per share. The dividend is payable on March 14 to its stockholders of record as of March 3, 2025.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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