Up 20% Since May, Eastgroup Properties Continues To Impress Wall Street

What: Eastgroup Properties has given its shareholders a total gain of 20% since May 1, as the REIT continues to demonstrate strength. If analysts are correct, Eastgroup shares could rise another 12% or more over the next year.

Who: Eastgroup Properties Inc EGP is a Ridgeland, MS-based industrial REIT, operating primarily in the Southeastern states and the west coast of the U.S. 89% of its portfolio is business distribution buildings. Its total portfolio, including properties presently under development, comprises approximately 60.2 million square feet.

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Eastgroup was founded in 1969 and is a member of the S&P Mid-Cap 400 and Russell 1000 indices. As of June 30, it had 97.4% of its properties under lease.

Why: The recent news has been very positive for shareholders:

On July 30, Eastgroup Properties released its second-quarter operating results. Funds from Operations (FFO) of $2.05 per share was in line with analysts' estimates but trounced its FFO of $1.89 from Q2 2023. Revenue of $159.09 million beat the estimates of $157.00 million and was far ahead of revenue of $139.89 million in the year-ago same quarter.

 On August 23, announced its Board of Directors approved a 10.2% increase in its quarterly dividend, raising it from $1.27 per share to $1.40 per share, payable October 15 to shareholders of record on September 30.

Through June 30, Eastgroup had increased or maintained its dividend for 31 consecutive years, and with this latest dividend announcement, it has now increased the dividend for 28 of the past 31 years. The yield is now 3.03%.

The forward payout ratio is still a comfortable 67.3%. The one caveat is the Price/FFO ratio of 22.18 is well above the sub-sector median level of 14.50%.

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Recent analyst ratings and price targets have all been positive. On July 22, Wedbush analyst Richard Anderson upgraded Eastgroup Properties from Neutral to Outperform and raised the price target by 28.3% from $162 to $208. Then on August 5, analyst Anderson maintained Eastgroup at Outperform and raised the price target again from $208 to $209.

On August 22, Morgan Stanley analyst Stephen Byrd maintained Eastgroup at Equal Weight and raised the price target from $158 to $186. On August 28, Wells Fargo analyst Blaine Heck upgraded EastGroup from Equal-Weight to Overweight and raised the price target from $179 to $214.

Takeaway: Eastgroup Properties is on a roll and the Board's decision to raise the dividend by a generous 10.2% shows its confidence in sustaining or improving on its Q2 earnings going forward. The stock has already surpassed the price targets of several analysts and seems poised to eventually challenge the Wedbush or Wells Fargo targets.

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