A classic value ingesting strategy is to buy stocks or companies that supply something growing businesses need.
Prologis (NYSE: PLD) leases warehouses and fulfillment centers to other companies. Consequently, Prologis meets one of online retailers’ most vital needs: space to store the merchandise they ship.
Notably, ProLogis claims to provide over 676 million square feet of industrial real estate around the world. Thus, Prologis can meet the needs of fast-growing online retailers.
Online retail is Growing Fast
Fast-growing demand from online retailers definitely exists. For example, US e-commerce sales grew from $446.811 billion in 2017 to $504.842 billion in 2018, Statista estimates. Moreover, Statista estimates US e-commerce sales will grow from $560.747 billion in 2019 to $735.358 billion in 2023.
Plus, e-commerce accounted for 14.3% of American retail sales in 2018, Internet Retailer estimates. Additionally, Internet Retailer calculates American e*commerce grew by 15% in 2018.
More merchants are going online because total US retail sales were $3.63 trillion in 2019. However, one company Amazon (NASDAQ: AMZN) accounted for 40% of US online retail sales in 2018, Internet Retailer estimates. Amazon famously operates its own fulfillment centers.
However, third-party sellers account for 53% of Amazon’s 1st Quarter 2019 sales, Statista estimates. Thus, over half of Amazon’s “sales” come from potential Prologis customers. Amazon’s 1st Quarter 2019 sales were $59.7 billion, a press release states. Therefore, Amazon’s third-party sales were $31.641 billion in 1st Quarter 2019.
Does Prologis Make Money?
Correspondingly, Prologis reports an 11.3% revenue growth rate for the quarter ending on 31 March 2019. On the other hand, Prologis reports quarterly revenues of $772.05 million on that date.
Prologis made money last quarter with a gross profit of $545.93 million, an operating income of $188.38 million, and a net income of $348.55 million. Plus Prologis generates a little cash from its operations.
To explain, Prologis had an operating cash flow of $494.61 million but a negative cash flow of -$202.36. Additionally, Prologis had an investing cash flow of $159.64 million and a negative financing cash flow of -$748.63 million.
Finally, Prologis does not have that much cash. The company had just $251.03 million in cash and short-term investments on 31 March 2019.
Is Prologis a Value Investment?
I do not consider ProLogis a value investment even though it is an even infrastructure provider. To explain, I cannot call Prologis (NYSE: PLD) a value stock because it has little cash.
Moreover, Mr. Market overpriced Prologis with a share price of $81.28 on 17 July 2019. I see nothing at Prologis worth $81.28, not even the 53₵ dividend it paid on 28 June 2019.
That dividend grew by 5₵ in 2019 rising from 48₵ on 31 December 2018 to 53₵ on 29 March 2019. Additionally, that dividend is reliable because Dividend.com estimates Prologis’s dividend has been growing for the past five years.
Is Prologis a Good Dividend Stock?
Prologis investors received a dividend yield of 2.61%, an annualized payout of $2.12, and a payout ratio of 70.4% on 17 July 2019. Thus, Prologis is a good dividend stock that appears a reliable.
If you are looking for an obscure real-estate related investment for the age of Amazon, Prologis is worth investigating. This company is in a great position to cash in on the explosive growth of online retail.
More importantly, Prologis is not sexy, not-well known, and cheap when compared to Amazon. Notably, Mr. Market was charging $1,992.03 a share for Amazon; a stock that pays no dividend, on 17 July 2019.
Thus, I consider Prologis a good investment when you compare it to Amazon. If you are looking for a cheap and safe stock in the online retail sector – investigate Prologis. Even though Mr. Market overprices PLD it has many of the characteristics of a classic value investment.