Do you like dividends? How about dividends that grow at a rate of as much as 13% a year?
Wall Street is an emotional place, with stocks often going to extremes on the upside and the downside. Sure, over the long term, the market is rather efficient, but it usually has to go through some pretty wild gyrations to get there. That’s why market downturns can be great times to buy stocks, though sometimes specific sectors go out of style, too. Right now Prologis (PLD 0.92%) and Rexford Industrial (REXR 0.55%) look like pretty interesting dividend stocks. If there’s a broad market sell-off, they could turn into spectacular buys.
Prologis and Rexford do the same thing in different ways
The big connection between Prologis and Rexford Industrial is that they are both real estate investment trusts (REITs) that invest in the industrial sector. That includes warehouses and manufacturing spaces. This is not an exciting property category, since the properties are usually just big boxes into which tenants put things as they move along the supply chain. Even manufacturing assets, which can be highly complex, are really just big boxes with machinery inside of them.
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What tends to be vitally important in the industrial space is location. And that’s what separates these two industrial REITs. Prologis is focused on owning properties in key transportation hubs around the world. To put it mildly, Prologis is gigantic. The company owns more than 5,600 properties containing 1.2 billion square feet of space across North America, South America, Europe, and Asia. It has over 6,700 customers. Simply put, Prologis is the 800-pound gorilla of the industrial sector, with locations in just about every important transportation hub in the world.
It shouldn’t be surprising to discover that Prologis has a huge market cap of around $110 billion. At the other end of the spectrum is Rexford, with a market cap of around $11 billion. Rexford is hyperfocused on just the Southern California market, with roughly 720 buildings and 1,600 customers.
Southern California is an important market, however, ranking among the largest in the world because it is a vital gateway between the U.S. and Asia. It has among the lowest vacancy rates in the United States industrial niche and is generally supply constrained, giving those that own industrial buildings in the region a leg up when it comes to rent negotiations. If you had to pick one industrial market to focus on, Southern California would be a top contender.
The proof is in the supercharged dividend growth
Although the strong business foundations are important, the real story here is the dividend growth. Prologis, despite its gigantic size, has increased its dividend at an annualized rate of 11% over the past decade. Smaller Rexford has done even better for investors, with dividend growth of 13% over that same span.
Those aren’t flukes driven by one big dividend boost. The last increase for Prologis, which was made at the start of 2024, was from $0.87 per share per quarter to $0.96, which is a roughly 10% hike. Rexford’s last increase also came in early 2024 and it was a jump from $0.38 per share per quarter to $0.4175, which is roughly 10% as well.
These two industrial REITs are still going strong. Plus, their dividends are rising far more quickly than the historical rate of inflation growth over time. So the buying power of their dividends is increasing, which is exactly why you want to buy supercharged dividend growth stocks like Prologis and Rexford.
That said, there’s a downside here, but one that most dividend growth investors will probably find acceptable. Prologis’ dividend yield is roughly 3.1%, while Rexford’s yield is 3.3% or so. Those are modest yields for REITs, highlighting that Wall Street is aware of the strong dividend growth they offer and has priced them at a premium. But those yields are still highly attractive relative to the S&P 500 index’s tiny 1.3% yield.
Buy now or wait for a deeper pullback?
The truth is that Rexford and Prologis are reasonably attractive right now, with dividend yields that are toward the high end of their 10-year ranges, so you might want to consider adding them to your portfolio today. But if there’s a broader stock market sell-off in which investors throw the baby out with the bathwater (a common thing during bear markets), they could become even more appealing. So even if you don’t buy Prologis or Rexford now, you’ll probably want to keep these supercharged dividend growers on your wish list.
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Prologis and Rexford Industrial Realty. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.