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.
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