Since its creation in 1896, the Dow Jones Industrial Average has become one of the most followed and familiar barometers of stock market performance.
The Dow index contains 30 of the U.S.'s largest publicly traded companies, generally considered among the most stable and reliable in America, having weathered economic headwinds while successfully responding to fast-changing technologies and consumer preferences.
E-commerce and its profound effects on retail and logistics is one example of those headwinds. Prologis (PLD 0.69%), owner-operator of the largest warehouse network on the planet, is not a member of the Dow -- but it has outperformed it by capitalizing handsomely on that opportunity while reliably raising its cash payouts to shareholders.
A steady yield that bests the big index
During the past 10 years, Prologis stock has handily trounced the Dow. The chart below shows what that looks like in terms of $1,000 investments made in January 2014 in Prologis stock and a benchmark exchange-traded fund, the SPDR Dow Jones Industrial Average ETF.
PLD Total Return Level data by YCharts
Prologis is a real estate investment trust (REIT) that as of Sept. 30, 2023, owned or had investments in 5,559 buildings. They contain 1.2 billion square feet of logistics space occupied by about 6,700 business-to-business and business-to-consumer customers in 19 countries.
As a REIT, Prologis is mandated by law to pay at least 90% of its taxable income to shareholders in the form of dividends. The trust is on a run of 10 straight years of annual increases, including by an average 14.5% a year for the past three years.
As a result, Prologis's yield also has typically been higher than that of the SPDR Dow ETF. It's currently about 2.6% versus the SPDR Dow ETF's 1.8%, and that edge has been the case for all but two points in the past decade, as shown below.
PLD Dividend Yield data by YCharts
The big picture points to more outperformance
Prologis is by far the largest of the industrial REITs, a sector that began accelerating with the growth of e-commerce and then soared during the pandemic. The positive trend should continue as e-commerce revenue grows at a forecast annual rate of about 8% worldwide for at least the next few years.
Vacancy rates also remain near record lows and that enhances Prologis's ability to raise the rent, both from built-in escalators in its long-term contracts and especially when it signs new leases.
Wall Street rewards growth and Prologis also has a long history of expanding through acquisitions, including spending $40 billion since 2020 on three competing trusts, most prominently Duke Realty.
These strategic acquisitions add to its extensive portfolio of strategically located properties and the trust's ability to increase income and dividends that help continue its Dow-topping ways.
