Duke Realty (DRE) stock is trading around $13.5 versus its 52-week range of $10.45-$16, up 22% in the past 1-year. More importantly, the stock pays a 5% dividend. For those income-oriented investors looking to add extra income to their portfolio before year-end, this name is worth your look. Other industrial REITs such as SL Green (SLG) yields 1.4%, Boston Properties (BXP) yields 2.5%, and Prologis (PLD) yields 3.6%. On valuation, Duke Realty trades with a FFO multiple of 12.5 times, a discount to its industrial peer average of 18.5 times.
Positive fundamentals, which make this office REIT an attractive investment:
Strong occupancy level at 91.9% as of September, 30th, 2012, slightly higher than the 87-90% occupancy level in the last 4 years.
Duke's portfolio of in-service tenants is diversified among 20 tenants, which contribute less than 20% of the annualized rent. Also, the top client is the U.S. Government, which contributes 2.5% to annualized rent.
The balance sheet consists of ample liquidity in the form of cash & cash equivalents of $115 million, and $850 million in available capacity under its credit line. The company has $725 million in unsecured debt that matures through 2014. Given the strong liquidity position of the company, retirement of the debt is not a risk. There is always a possibility that the company will refinance the debt before maturity.
In Q3-2012, tenant retention was a record 90% during the quarter, up from 66% last quarter. Also leases continued to renew at a positive net effective rent spread.
Risk in investing in Duke remains a weaker than expected job market for its tenants.
The chart below compares share performance over the past year. "D"s mark dividends paid.
click to enlarge image
Tool provided by Kapitall.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.