One of the best things about the stock market is that it offers something to fulfill just about everyone’s needs. If you’re an income investor, your primary consideration is naturally to derive the best yield from your dividend stocks at the time of purchase, but it’s also knowing that company dividends will continue to grow over time to enhance your monthly or quarterly income.
On the other hand, growth investors are not usually too concerned about dividends but are looking for a stock that can generate solid appreciation over time. Sometimes, investors can have both. Here’s a look at one popular real estate investment trust (REIT) over the past five years and what it’s generating in dividends today compared with November 2017:
Prologis Inc. PLD is a San Francisco-based industrial REIT that owns and manages industrial logistics properties across the U.S. and in 18 other countries. Founded in 1983, Prologis has been a leader in appreciation among REIT stocks. Although it pays an annual dividend of $3.16, it is more growth than income oriented. Its annual dividend yield is usually well below other REITs in its peer group.
Between October 2017 and April 2022, Prologis stock ran up from $56 to $174, a gain of approximately 210%, Very few REITs will ever be able to match that type of performance.
While Prologis’s appreciation performance has been stellar, it has never been known for generating a high dividend yield. But welcome to 2022, where the Federal Reserve has been on a mission to squash inflation with four consecutive three-quarters of a point interest rate hikes.
Interest rate hikes slammed Prologis’s stock price from $174 to a low of $98 in mid-October. And although it has bounced back to nearly $109 since, Prologis now has a dividend yield of 2.91%, or some 22% higher than its five-year dividend yield average.
During that incredible five-year run, Prologis raised its quarterly dividend several times, increasing it from $0.44 per share to $0.79. So take a look at how much $10,000 invested in Prologis five years ago would be generating in dividends today.
If you had invested $10,000 in Prologis stock in November 2017, you would have received 150.29 shares at a starting price of $66.54. During those five years, you would have received $11.69 in dividends. With the appreciation, your total return would be 79.89%. The original investment of $10,000 would now be worth $17,986.
If you had chosen to reinvest the dividends, as many growth-oriented investors do, your original 150.29 shares would now have grown to 170.48 shares, for a total return of 84.14%. Your starting investment of $10,000 would now be worth $18,413.
In the most recent quarter, with a dividend of $0.79 per share, 150.29 shares would have generated $118.72 in cash.
Obviously, with the pullback in price, Prologis is not quite the growth stock it once was but has enriched shareholders with a much better dividend yield than in past years.
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