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DCT Industrial’s (DCT) Rating Raised by S&P: Time to Buy?


Ushering in good news for its shareholders, DCT Industrial Trust DCT declared that S&P Global Ratings has upgraded its corporate credit rating and the issue-level rating on the company’s senior unsecured notes to BBB from BBB-. The outlook is stable.

The rating agency acknowledged DCT Industrial’s solid operating performance, improvement in credit protection initiatives and strengthening of asset quality.

Notably, the rating upgrade enhances its creditworthiness in the market and is likely to boost investors’ confidence in the stock. In fact, such moves provide companies an opportunity to enjoy reduced costs on debts and better access to capital. DCT also has a Baa2 rating from Moody’s Investors Service.

In addition, shares of DCT Industrial have outperformed the Zacks categorized REIT Equity Trust – Other industry year to date. In fact, over this time frame, DCT Industrial logged in a return of 21.7% against just 0.33% booked by REIT Equity Trust – Other industry.

The fundamentals of the industrial sector remain solid, with demand for space being quite high amid limited supply. This is because amid economic expansion, e-commerce boom and heightened urbanization, companies are shifting their strategy toward services like same-day delivery and other such options. This has been fueling demand for warehouse distribution facilities.

Further, with a larger customer base, companies are opting for supply-chain consolidation, resulting in greater demand for logistics infrastructure and efficient distribution networks, thereby creating scope for industrial REITs to flourish. (Read more: 3 REITs for Your Black Friday Shopping Cart)

Moreover, DCT Industrial is witnessing demand from not only e-commerce retailers and traditional retailers, but also from conventional consumption-orientated companies, per REIT.com news. Alongside these positive market developments, robust fundamentals of this Zacks Rank # 2 (Buy) stock have brightened DCT Industrial Trust’s prospects.

Investors interested in the REIT industry can consider stocks like Duke Realty Corp. DRE, Mack-Cali Realty Corp. CLI and Prologis Inc. PLD. Each of these stocks has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Duke Realty has experienced 0.8% upward revision in full-year 2016 estimates to $1.20 in the past 60 days.

Mack-Cali has long-term expected growth rate of 6.4% against the industry average of 5.8%.

Prologis has exceeded estimates in each of the trailing four quarters, with an average beat of 3.15%.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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