One Outstanding Dividend Stock Decreased by 40% That’s Perfect for Long-Term Investment

Rexford Industrial is a company that specializes in industrial real estate. ( REXR 1.60% ) is currently providing a 3.3% dividend yield, which is over double the yield of the S&P 500 The index has seen its dividend grow each year for the past ten years, with an impressive annual increase of over 10%. Despite maintaining strong operational results, the stock remains 40% lower than its peak in 2022. Here’s why investing in this real estate investment trust (REIT) and keeping it in your portfolio for the long haul could be a smart move.

What is the business of Rexford Industrial?

As suggested by its name, Rexford Industrial holds industrial real estate. This portfolio includes warehouses and manufacturing properties, which are common components of an industrial portfolio. REIT Rexford presently possesses more than 420 properties and approximately 720 buildings. It has about 1,600 tenants and is considered one of the larger industrial real estate investment trusts (REITs), boasting a market capitalization of $11 billion.

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The main distinction between Rexford and other industrial REITs is that Rexford is solely focused on one geographical area, Southern California. For investors interested in owning a variety of businesses, this REIT might not be immediately appealing. However, it’s worth learning more about the Southern California region before dismissing it altogether.

Southern California ranks as the biggest industrial market in the United States. If considered independently, it would be the world’s fourth-largest industrial market, making it an extremely appealing area for business operations. Additionally, it boasts the lowest industrial vacancy rate in the country. If you were to concentrate on a single industrial region, this would likely be your top choice.

What is happening with Rexford’s company?

Looking at the broader view, the industrial real estate market isn’t performing as strongly as it did a few years back. For instance, even though Southern California boasts the lowest vacancy rate for industrial properties, this rate has more than doubled to almost 4% since reaching its lowest point in 2023. Similar increases in vacancy rates have occurred in other areas, causing concern among investors about the overall industrial REIT sector.

This could present a chance for investors, considering how significantly Rexford’s stock has dropped. Even with the challenge of increasing vacancy rates, Rexford’s properties were 96.9% occupied in the second quarter. Additionally, it managed to raise lease rates by an impressive 67% on leases that were due for renewal in Q2. This clearly shows that there is still strong demand for its properties.

REXR data by YCharts.

As a result of this robust leasing performance, operating cash flow Funds from operations (FFO) per share increased by an impressive 11% compared to the same quarter last year. There is reason to be optimistic that this strong performance will persist. To begin with, lease renewals are expected to lead to significant rent increases for several more years. However, that’s not all.

Rexford has significant plans to enhance its properties, enabling it to increase rental rates. Additionally, its current leases already include scheduled rent increases. Furthermore, Rexford is consistently purchasing new properties, thereby growing its portfolio. Essentially, management is utilizing both internal and external strategies to sustain solid performance. Therefore, even with the decline in stock value, Rexford continues to operate effectively.

Rexford is a long-term investment.

It’s worth noting that Rexford’s dividend yield may not be sufficiently enticing for investors who prioritize maximizing immediate income. However, the company’s remarkable rate of dividend growth is particularly appealing for those interested in dividend growth stocks. Although the stock price has dropped due to a general downturn in the industrial sector, Rexford maintains a strong operational performance, thanks in part to its distinct geographic focus. If you appreciate the value in this REIT’s strategy, purchasing Rexford Industrial while others are selling could prove to be a satisfying investment decision.