1 High-Yield Dividend Stock to Buy and Hold
Forget the Magnificent 7 for a moment, and consider the merits of owning a boring old real estate company that has grown revenues predictably at a rapid rate for the past 3 years.
Rexford Industrial Realty owns one of the most concentrated portfolios of industrial real estate in Southern California, an area where vacancy rates for industrial properties have hovered near 1% over the last decade.
The specific focus has led to Rexford acquiring a unique advantage in the high-demand, land-constrained Southern California industrial real estate market. So, is it a buy after dipping 9% this year?
Key Points
- Rexford owns over 44 million sq ft across 400+ properties in a region with ~1% vacancy rates, leveraging scarce land and high demand to raise rents and maintain high occupancy.
- The company accelerates growth by acquiring undervalued properties below replacement cost, investing over $2 billion in the past five years with $500 million more planned.
What Makes Rexford Industrial Realty Special?
Rexford Industrial Realty (NYSE: REXR) owns and operates over 44 million square feet of industrial space across more than 400 properties, primarily in the Inland Empire, Los Angeles, Orange County, and San Diego.
As e-commerce and supply chain demands grew, in addition to Southern California’s proximity to key logistics hubs like the ports of Los Angeles and Long Beach, so too did demand for Rexford’s properties.
In Southern California’s industrial real estate market, which is characterized by high demand, low vacancy rates, and limited new supply, Rexford has found a winning formula.
The simple reality is with industrial vacancy rates below 1%, businesses have few alternatives when seeking industrial space, and that allows Rexford to raise rents and maintain strong occupancy rates.
The scarcity of developable land in this region further strengthens Rexford’s moat and acts as a defense to new competitors entering the market at scale.
It also means Rexford can produce steady growth and reliable revenues regardless of economic conditions.
Rexford Is Not Sitting Still
To keep its upward revenue trajectory, Rexford has been targeting underperforming properties that can be redeveloped to enhance their values.
Since its IPO in 2013, Rexford has steadily acquired properties below replacement cost and implemented value-added strategies to boost both occupancy rates and rental income.
The raw data reveals that Rexford has acquired over $2 billion worth of properties in the last five years, significantly expanding its portfolio and income potential. It’s also got an astonishing $500 million in acquisitions planned for the coming year.
Is Rexford a Buy?
Rexford may well be a diamond in the REIT industry. Its same-property NOI grew by 8.2% in 2023, highlighting just strong leasing activity and rent growth is.
The balance sheet looks good with a debt-to-EBITDA ratio of 4.6x, and so providing ample flexibility for future acquisitions and developments.
And the all-important funds from operations per share increased by 12% year-over-year, further highlighting its ability to generate stable cash flow and return value to shareholders.
Add to that the fact that Rexford has increased its dividend for 11 years straight, a yield that now sits at 6.17% and you can see why the company is attractive to income-seeking investors.
One aspect of the financials that jumps out is how revenues year-over-year have grown in each of the past 12 quarters. Similarly, earnings before interest and taxes have largely been climbing over the past 3 years too.
Put it all into the mix and Rexford offers the stability of revenues that income-oriented investors like with a compelling dividend yield and the likelihood to withstand economic storms. Add to that the pullback this year and it’s looking ever more enticing.
