There are a lot of reasons to like Prologis (PLD 1.41%), the world's largest owner of distribution warehouses. Many of those same reasons apply to one of its much smaller competitors, Terreno Realty (TRNO +1.03%).
Both make their living on logistics, profiting from consistent, growing demand for warehouse space from business-to-business and business-to-consumer shippers. They're both real estate investment trusts (REITs) that have consistently grown their total return over the years.
Both these industrial REITs have also easily outpaced the S&P 500 over that time, as shown below, and have the business moats and momentum in place to earn them consideration now by long-term investors.
PLD total return level data by YCharts.
Terreno's territory is tightly focused
There are some clear differences in scale and focus between Terreno and Prologis. The latter is a global powerhouse, with 5,495 buildings comprising 1.2 billion square feet serving 6,600 customers in 19 countries around the world, making it a major cog in the worldwide distribution machine.
Terreno, meanwhile, has a portfolio of 252 smaller warehouses comprising 15.4 million square feet and another 46 improved land parcels, all occupied by 575 customers. But here's where their strategy looks particularly interesting.
NYSE: TRNO
Key Data Points
Terreno's properties are located near airports, seaports, and major interstates in six coastal markets: Los Angeles, northern New Jersey/New York City, the San Francisco Bay Area, Seattle, Miami, and Washington, D.C.
These are high-population, high-demand markets for e-commerce and other shippers, and Terreno's specific focus on in-fill sites with regulatory and physical supply restraints helps keep its bays and coffers full.
A good measure of that success is Terreno's growth in funds from operations (FFO). The chart below shows that, and it shows the corresponding growth in dividend payouts. That gap speaks not only to how well these payouts are supported but also to the room there appears to be for the payouts to grow.
TRNO FFO Per Share (TTM) data by YCharts
Prologis or Terreno? How about both?
Prologis stock is still cheaper by one key measure, the ratio of price to FFO per share, at about 16.5 for Prologis to nearly 22 for Terreno. But both have sound balance sheets, experienced and proven management, and moats around their businesses that give them durability for what the economy brings next.
Both are strong stocks that deserve a place in the dividend-producing part of your portfolio. And you don't have to choose between the two. I own both and have been adding to them over time.
