Prologis (PLD 2.50%) is offering a dividend yield of 3.8%, which is toward the high end of the stock's yield range during the past decade. Even after tariff tensions have cooled some, the shares are still more than 21% below their 52-week high. Although there is a reason to worry about Prologis over the near term, the long term still seems bright. That's particularly true if you consider the real estate investment trust's (REIT's) $42 billion internal growth opportunity.
What does Prologis do?
Prologis is a REIT that focuses on industrial properties. It tends to prefer warehouses that are located in key international trade hubs. It is both a REIT giant and an industrial REIT giant. With a market cap of about $100 billion, it is one of the largest publicly traded REITs you can buy.
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Prologis owns more than 5,800 buildings. Those buildings hold more than 1.3 billion square feet of space and are located in 20 countries. It has locations in North America, South America, Europe, and Asia. It serves roughly 6,500 customers. On top of all of that, it has an asset-management business investing in industrial assets for institutional investors, with $198 billion in assets under management (AUM).
Prologis is a giant any way you look at it. Its size provides it with advantageous access to capital markets. And it has the scale to act as an industry consolidator, easily buying smaller peers. That said, the REIT's focus on being in key global distribution hubs does tie it directly to global trade. So the current tariff upheaval is an issue that investors need to watch.
Over the long term, however, it seems highly unlikely that global trade is going to stop. There may be shifts and changes, but this is probably a short-term issue, which means that Prologis' stock drop could be a buying opportunity. That's doubly true when you look at the undeveloped land the REIT owns.
Prologis has a $42 billion opportunity
Prologis doesn't just expand by acquiring already constructed buildings; it also has a long history of building warehouse assets from the ground up. What's interesting here is that the company estimates that the undeveloped land it owns could support a build-out worth as much as $42 billion.
That $42 billion figure is not how much money the land is worth; it's how much capital investment the REIT estimates it would take to build all of the warehouses that could fit on the undeveloped land it owns. Given the REIT's roughly $100 billion market cap, this is a huge long-term growth opportunity.
And Prologis is in complete control of the timing. The $42 billion internal growth opportunity is way too large to happen in a single year. Because Prologis is fairly conservative, it isn't likely to build anything unless it believes it can find a tenant or has one already signed up. So the $42 billion will be spent over time, providing an extra boost to growth for years to come.
Prologis has a growth catalyst if you know where to look
Wall Street is an emotional place, and emotions are running high today. Prologis is caught up in the buzz because of its important position in global trade. This is an opportunity for long-term investors to buy the REIT while it has a historically high yield. You can take comfort knowing that Prologis has an ace up its sleeve given the $42 billion internal capital investment opportunity built right into its already huge portfolio. That should make it easier for you to think long term while most other investors are thinking about the short term.
