Updated 3/11/25
LXP Industrial Trust (NYSE: LXP) is a real estate investment trust (REIT) that focuses on single-tenant industrial properties. Over the years, it has shifted its portfolio away from a mix of real estate holdings and doubled down on industrial properties, particularly warehouses and distribution centers. This shift aligns well with the growing demand for logistics infrastructure, especially as e-commerce continues to expand.
For dividend investors, REITs can be a great source of passive income, and LXP’s current 5.73% dividend yield is definitely eye-catching. But is this dividend sustainable? And more importantly, can investors count on it for long-term income growth? Let’s take a closer look.
Key Dividend Metrics
📈 Dividend Yield: 5.73%
💰 Forward Dividend Rate: $0.53 per share
📆 Dividend Payout Schedule: Quarterly
📊 Five-Year Average Yield: 4.51%
💸 Payout Ratio: 403.85%
🔍 Ex-Dividend Date: December 31, 2024
📉 Dividend Growth: Minimal in recent years
Dividend Overview
One of LXP’s biggest selling points for income investors is its above-average dividend yield. A yield of 5.73% is well above the broader market and competitive within the REIT sector. However, high yields can sometimes signal trouble, and in LXP’s case, there are a few concerns worth noting.
The payout ratio tells a big part of the story. At over 400%, it’s clear that LXP is paying out far more in dividends than it earns. REITs often have higher payout ratios due to their legal requirement to distribute most of their earnings, but anything over 100% is a red flag. When a company is paying out more than it brings in, it’s either dipping into reserves, selling assets, or taking on debt to maintain its dividend. None of those are ideal for long-term stability.
While LXP has been consistent with its payments, dividend growth has stalled. Many of its industrial REIT peers have steadily increased their payouts over the past few years, while LXP has remained relatively flat.
Dividend Growth and Safety
LXP’s dividend history suggests that investors can count on stable payments, but the lack of growth limits its appeal. While some REITs consistently raise their dividends year after year, LXP has kept its payouts largely the same. This could be a result of tight financials and a high payout ratio, which don’t leave much room for increases.
Another concern is the potential for a dividend cut if earnings don’t improve. With such a high payout ratio, LXP needs strong cash flow to maintain its dividend. While the company generates positive free cash flow, the overall trend in earnings hasn’t been strong enough to provide confidence in future increases.
Chart Analysis
Price Action and Moving Averages
LXP Industrial Trust has been on a recovery path after a notable downtrend late last year. The stock is now trading near 9.20, having rebounded from lows below 8.00 earlier in the year.
The 50-day moving average (orange line) is starting to slope upward, signaling a shift in momentum after a prolonged period of decline. The 200-day moving average (blue line) remains in a downward trend but is flattening out, suggesting the longer-term downtrend could be losing steam.
A key development is that LXP is testing its 200-day moving average from below. If the stock manages to close and sustain above this level, it could indicate a potential trend reversal and attract more buyers. However, if it struggles to break through, the stock might consolidate or even pull back.
Volume Trends
The volume bars show moderate trading activity, with no extreme spikes recently. A previous high-volume day in October coincided with a significant price move, possibly a sign of institutional selling at the time. More recent volume levels suggest a gradual accumulation phase, with buyers stepping in as the stock has climbed off its lows.
One thing to watch is whether volume increases as LXP approaches resistance levels. Higher volume on a breakout would indicate stronger conviction from buyers, while low volume could suggest the rally is losing strength.
Relative Strength Index (RSI)
The RSI indicator at the bottom of the chart is trending upwards, hovering near the overbought zone but not quite there yet. This suggests that buying pressure has been consistent, but the stock isn’t in extreme territory where a pullback is imminent.
If RSI moves above 70, it could indicate overbought conditions, signaling a short-term pause or pullback. On the other hand, if RSI stays in the 50-70 range, it would suggest continued bullish momentum.
Key Support and Resistance Levels
- Support: The most recent swing low near 8.00 serves as a strong support level. If the stock were to decline, this area could attract buyers.
- Resistance: The 9.50 to 9.60 zone aligns with the 200-day moving average and recent price action. A break above this level would be a bullish signal, while failure to do so could lead to some consolidation or minor pullback.
Overall Market Context
LXP’s chart suggests a potential transition from a downtrend to an early-stage uptrend. The shorter-term moving average is curling up, and momentum indicators are pointing in the right direction. However, the 200-day moving average remains a key barrier, and a breakout with strong volume would be needed for confirmation.
Investors will want to watch how LXP behaves around this resistance zone and whether buying interest continues. If momentum slows down, some consolidation could occur before the next major move.
Analyst Ratings
📈 LXP Industrial Trust has recently experienced a mix of analyst upgrades and downgrades, reflecting varied perspectives on its performance and future prospects.
🟢 In August 2024, one major investment firm adjusted its price target for LXP Industrial Trust to 10 from 9, maintaining an “In Line” rating. This adjustment suggests a slightly more optimistic view of the company’s valuation, possibly due to improved financial metrics or a more favorable industrial real estate market.
🔴 Conversely, in December 2023, another firm trimmed its price target on LXP Industrial Trust to 11 from 12, while maintaining an “Overweight” rating. The reduction in the price target indicates a more cautious outlook, potentially due to concerns about the company’s growth prospects or broader economic factors like interest rate fluctuations impacting REITs.
💰 As of the latest consensus among analysts, the average price target for LXP Industrial Trust stands at 11.33, with forecasts ranging from a low of 11.00 to a high of 12.00. This suggests an anticipated upside of approximately 23.77 percent from the current stock price, reflecting moderate optimism about its future performance.
These recent analyst actions highlight a balanced view of LXP Industrial Trust. Some analysts are more bullish, raising their price targets in response to improving fundamentals, while others remain cautious due to uncertainties in the broader real estate sector. The stock’s future direction will likely depend on earnings growth, occupancy rates, and overall macroeconomic conditions.
Earnings Report Summary
LXP Industrial Trust wrapped up the fourth quarter of 2024 with some solid numbers, showing strong momentum in its transition to an industrial-focused portfolio. The company delivered a net income of $31.4 million, or $0.11 per diluted share, which is a big jump from $13 million in the same quarter last year. Revenue also climbed to $100.9 million, largely thanks to a tenant exercising a purchase option and some solid gains from rent increases and new property acquisitions.
Funds From Operations (FFO)
FFO, a key metric for REITs, came in at $47 million, or $0.16 per share, which is slightly lower than last year’s $51.4 million. While the dip might seem concerning at first, it’s more a reflection of the company’s ongoing investments and strategic adjustments within its portfolio.
Leasing and Development Activity
LXP had a busy year on the leasing front, locking in 4.5 million square feet of new leases and lease extensions. Base rents increased by over 46%, showing strong demand for its industrial properties. The company also completed three fully-leased warehouse projects in key markets like Phoenix, Greenville-Spartanburg, and Columbus.
Buying, Selling, and Portfolio Adjustments
The company spent about $108.7 million on development projects and another $7.6 million upgrading an Orlando property. On the flip side, it offloaded its last two office assets and sold four warehouse facilities for a total of $165.3 million. This continues LXP’s strategy of focusing purely on industrial real estate while shedding properties that don’t fit its long-term vision.
Balance Sheet and Debt
LXP ended the quarter with $1.6 billion in total debt and a net debt-to-EBITDA ratio of 5.9x. The company has an average debt maturity of 5.5 years, with a relatively low 3.68% interest rate. This suggests a manageable debt load, which is crucial for REITs that rely on financing to expand.
Dividend and Guidance for 2025
LXP kept its quarterly dividend steady at $0.135 per share, which was paid out in January. It also declared a preferred stock dividend of $0.8125 per share. Looking ahead, the company expects net income per share to range between $0.01 and $0.05 in 2025, with adjusted FFO projected between $0.61 and $0.65 per share.
Overall, LXP’s latest earnings report paints a picture of a company making all the right moves in the industrial space. With strong leasing activity, smart property acquisitions, and a focused portfolio strategy, the company seems to be positioning itself for long-term stability and growth.
Financial Health and Stability
For any REIT, a solid balance sheet is essential since the business model relies heavily on borrowing to acquire and develop properties. LXP has a moderate debt load, but its earnings growth hasn’t been particularly strong.
- Total Debt: $1.59 billion
- Debt-to-Equity Ratio: 74.84%
- Operating Cash Flow (TTM): $211.19 million
- Levered Free Cash Flow (TTM): $257.14 million
While these numbers indicate that LXP isn’t drowning in debt, they also show limited financial flexibility. The company’s return on equity (ROE) sits at just 1.95%, and return on assets (ROA) is 1%, both of which are quite low. This suggests that LXP’s properties aren’t generating strong enough returns compared to other REITs in the industrial sector.
One positive sign is the 21.6% year-over-year revenue growth, which shows the company is expanding. However, the 126.2% earnings growth figure is likely coming off a low base and may not be sustainable.
Valuation and Stock Performance
When evaluating LXP’s stock, a few key metrics stand out:
- Price-to-Book Ratio: 1.35
- Price-to-Sales Ratio: 7.45
- Enterprise Value/EBITDA: 13.28
LXP currently trades near the lower end of its 52-week range ($7.65 to $10.57), sitting at $9.09. While this could suggest potential upside, it also reflects skepticism about its earnings strength and long-term dividend sustainability.
The stock’s 50-day moving average ($8.43) is below its 200-day moving average ($9.24), which often signals short-term weakness. Investors seem hesitant to bid the stock higher until earnings show more consistency.
Risks and Considerations
1️⃣ Dividend Sustainability – The payout ratio is far above normal levels, raising concerns about whether the current dividend can be maintained.
2️⃣ Rising Interest Rates – Since REITs depend on borrowing, higher interest rates increase debt costs and could pressure profitability.
3️⃣ Lack of Dividend Growth – Investors looking for a steadily increasing income stream may be disappointed, as LXP has shown little dividend growth in recent years.
4️⃣ Volatile Stock Price – The stock has fluctuated between $7.65 and $10.57, and recent trends suggest it may continue to struggle.
5️⃣ Competition – Other industrial REITs, such as Prologis (PLD), offer higher growth potential and stronger financials, making LXP a tougher sell.
Final Thoughts
LXP Industrial Trust offers a high dividend yield, which may appeal to income-focused investors. However, the extremely high payout ratio, slow dividend growth, and uncertain earnings trajectory create concerns about long-term sustainability.
For those who simply want a high yield with moderate risk, LXP could still serve as an income-generating asset. But for investors looking for dividend growth and stronger financial stability, other industrial REITs might offer better long-term prospects.
Ultimately, whether LXP belongs in a dividend portfolio depends on risk tolerance and income goals. If you’re comfortable with higher yields but limited growth potential, it might be worth considering. However, the risk of a dividend cut is something investors shouldn’t ignore.
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