Eastgroup Properties Company’s Financial Performance
Autor: liyimeng1808 • September 3, 2018 • Essay • 321 Words (2 Pages) • 479 Views
EastGroup Properties
EXECUTIVE SUMMARY
The report analyzes EastGroup Properties Company’s financial performance and estimates the company’s stock price. Also, this report explains four main factors that affect EastGroup’s target price.
THE RECOVERY OF THE ECONOMY BOOSTS MARKET SHARES
EastGroup is in the real estate investment trust (REIT) industry. The REIT industry recovers gradually from the financial crisis, and the U.S. REIT market value has increased 150 percent since 2015. The economic recovery stimulates this increase. Moreover, people’s purchasing power will increase constantly. Therefore, the recovery of the economy boosts EastGroup’s market shares.
THE STRATEGY OF THE OPERATION ENHANCES PROFITABILITY
EastGroup’s return on capital (ROC) was 4.56 percent in 2010 and increased to 5.56 percent in 2016. The company increases the ROC continually through three operating segments: internal operations, property development, and capital recycling. The company acquires and develops premier business distribution centers in metropolitan areas. This operating strategy allows the company to enhance the profitability and beat the competitors in the REIT industry.
THE DEVELOPMENT OF INDUSTRIAL PARKS INCREASES REVENUE
EastGroup acquired the undeveloped land in Miami Gardens. The company plans to develop the land into an industrial park. This park is near a highway in the metropolitan city. The transportation convenience makes the park attractive to EastGroup’s customers. Therefore, the acquisition of the land in Miami will increase the company’s revenue.
THE GROWTH OF THE INCOME INCREASES DIVIDEND PAYMENTS
EastGroup must distribute 90 percent of the taxable income quarterly because of the REIT industry regulation. The company’s cash dividend was 0.55 per share in 2014 and increased to 0.62 per share in 2016. The cash dividends have increased steadily over the past five years because of the growth of the revenue. This increase is a positive sign to potential investors.
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