Covered on FFO, thin on AFFO. The $0.57 quarterly dividend — $2.28 a year, raised 9.6% from $0.52 in August 2026 — takes about 81% of second-quarter FFO of $0.70 per share, so on the FFO lens the payout is covered. On the stricter AFFO lens it is not: first-half 2026 AFFO was $102.9 million against $109.4 million of common dividends paid, about a 106% payout, and second-quarter AFFO of $51.5 million ($0.48 per diluted share) sits below even the old $0.52 rate, let alone the new $0.57. The balance sheet carries the verdict for now — net debt of only about 3× EBITDA, investment-grade ratings, and no debt maturities left in 2026 — but a dividend that outruns AFFO has to be rebuilt by leasing, not by borrowing.
Key risk: Leasing capex and re-leasing costs keep AFFO below FFO, and industrial demand softening in Terreno’s six coastal infill markets would slow the rent growth that is supposed to close the AFFO gap.
Changes if: AFFO covers the $0.57 quarterly rate on a sustained basis — a quarter or two of AFFO above the dividend would restore the cushion. If AFFO stays below the dividend while the payout keeps rising, the raise was premature.
- !AFFO coverage check: First-half 2026 AFFO was $102.9 million against $109.4 million of common dividends paid (about 106%); Q2 AFFO was $51.5 million, or $0.48 per diluted share, against the $0.52 rate then in force. The new $0.57 rate is about 118% of Q2 AFFO per share.
- ✓FFO coverage check: Q2 FFO was $74.3 million, or $0.70 per share, up from $0.64 a year earlier — the new $0.57 rate takes about 81% of FFO, so the dividend is covered before maintenance and re-leasing costs.
- ✓Balance sheet check: Net debt of about 3× EBITDA is among the lowest in the REIT sector, with a first-time Moody’s Baa1 rating in June 2026 alongside Fitch BBB+, no maturities left in 2026 and only $150 million due in 2027.
- ✓Growth check: Cash same-store NOI rose 7.1% year over year in Q2 2026, occupancy was 97.6% across 20.6 million square feet at June 30, 2026, and the dividend was raised 9.6% to $0.57.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.