Rexford Industrial's Strong Dividend Potential and Growth
Rexford Industrial Overview
Rexford Industrial (NYSE: REXR) is currently offering a 3.3% dividend yield, significantly higher than the S&P 500 index. Over the past decade, the company has consistently increased its dividend at a rate of over 10% annually. Despite the fact that the stock is still 40% lower than its peak in 2022, it continues to demonstrate strong operational performance. This article discusses the reasons to consider investing in this real estate investment trust (REIT) for the long term.
What Does Rexford Industrial Do?
As suggested by its name, Rexford Industrial primarily owns industrial real estate, which includes warehouses and manufacturing properties, making it a typical industrial REIT. The company manages more than 420 properties, encompassing approximately 720 buildings and serving around 1,600 lessees. With a market capitalization of $11 billion, it stands among the larger industrial REITs.
Focus on Southern California
Unlike other industrial REITs, Rexford has a concentrated focus on a specific geographic area: Southern California. While this may deter investors seeking diversification, understanding the advantageous aspects of this particular region is crucial. Southern California represents the largest industrial market in the United States and ranks as the fourth largest globally if considered independently. Furthermore, this area boasts the lowest industrial vacancy rate nationwide, making it a compelling region for industrial investment.
Current Dynamics of Rexford's Business
Looking at the overall picture, the industrial real estate market is experiencing some challenges compared to previous years. For instance, although Southern California has the nation’s lowest vacancy rate for industrial properties, it has increased to nearly 4% since reaching its low point in 2023. This uptick in vacancy rates across various regions could heighten concerns among investors regarding the industrial REIT sector.
Nonetheless, this situation may represent an opportunity for investors considering Rexford’s significant stock decline. During the second quarter, Rexford's portfolio maintained an impressive occupancy rate of 96.9%. Additionally, it managed to increase lease rates by a remarkable 67% on renewing leases in Q2, indicating sustained demand for its properties.
Strong Financial Performance
The elevated leasing activity propelled Rexford's funds from operations (FFO) per share to an 11% increase year over year for the quarter. Upcoming lease rollovers could lead to further substantial rent increases for several years ahead. Furthermore, Rexford has committed to upgrading its assets, which not only permits higher rents but also includes built-in rent increases within current leases.
Why Consider Rexford a Buy and Hold Investment
While Rexford's dividend yield may not attract investors explicitly focused on immediate income generation, the notable growth rate aligns with the objectives of dividend growth investors. Though the stock price may have dipped due to a softness in the industrial sector, Rexford's operational effectiveness remains high, aided by its strategic geographic focus. Recognizing the value in Rexford’s approach suggests that this industrial REIT could be a rewarding investment, especially for those who decide to acquire shares while others are liquidating their positions.
Investment Considerations for Rexford Industrial Realty
Potential investors are encouraged to contemplate the following factors before purchasing Rexford Industrial Realty stock:
Recent analyst evaluations have spotlighted numerous compelling stock opportunities, yet Rexford Industrial Realty has not made the list. Investors are advised to carry out thorough research to discern whether this REIT fits their investment strategy.
Frequently Asked Questions
What is Rexford Industrial's primary business focus?
Rexford Industrial primarily focuses on owning industrial real estate, including warehouses and manufacturing properties.
Why is Southern California significant for Rexford?
Southern California is the largest industrial market in the U.S. and has the lowest industrial vacancy rate in the country, making it an attractive region for industrial investments.
How has Rexford's stock performance been recently?
Despite strong operational performance, Rexford's stock is currently down about 40% from its highs in 2022.
What are the future prospects for Rexford's dividends?
Rexford has demonstrated a strong dividend growth rate, which could continue as they upgrade properties and incur rent increases from existing leases.
Is investing in Rexford Industrial advisable?
Investing in Rexford could be beneficial for those looking for potential long-term growth in a focused industrial REIT that effectively manages its assets.
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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.
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