Updated May 24, 2021 by Bob Ciura
For investors looking for yield, the real estate industry is a great place to look. Intuitively, this is not surprising. Property owners collect predictable income from their tenants. Thus, the real estate business is qualitatively geared towards entrepreneurs who want to generate periodic income.
One of the best ways for investors to get involved in the real estate industry is with Real Estate Investment Trusts – REITs for short.
STAG Industrial (STAG) is a commercial REIT focused on leasing industrial real estate with a single tenant in the United States. The stock’s current dividend yield of 4.1% is nearly three times the average yield of the S&P 500.
In addition, STAG Industrial pays per month Dividends (instead of quarterly). This is very beneficial for retirees and other investors who rely on their dividend income to cover the cost of living. There are currently around 55 monthly dividend stocks.
You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics like dividend yield and payout ratio) by clicking the link below:
Given the high returns and monthly dividend payments, STAG Industrial has the potential to be a great investment for high income investors, especially as the company has a long growth path ahead of it.
STAG Industrial is the owner and operator of industrial properties. It focuses on commercial real estate with only one tenant and has ~ 462 buildings in 38 states. The focus of this REIT on single-tenant properties can cause a higher risk compared to multi-tenant properties, as the former are either fully occupied or completely empty.
However, STAG Industrial carries out a thorough quantitative and qualitative analysis of its tenants. As a result, credit losses have been incurred that have accounted for less than 0.1% of sales since going public. According to the latest data, 55% of tenants are rated publicly and 31% of tenants are rated “investment grade”. The company typically works with established tenants to reduce risk.
STAG has an added advantage due to the company’s exposure to e-commerce real estate, which gives it access to a key growth segment for real estate.
Source: Investor Presentation
STAG Industrial is facing headwinds due to the recession caused by the pandemic. However, the impact of the pandemic on the REIT has so far been limited due to the high credit profile of its tenants. The REIT collected 99.6% of its basic rent statements in 2020.
Some REITs consider single tenant properties to be risky as the properties are viewed as a binary offering. They are either fully rented or empty. By focusing on single-tenant properties, however, assets are created with incorrect prices, which STAG can then add to its portfolio at attractive valuations. This is of central importance for STAG’s strategy and a key differentiator between the competitors. In addition, STAG sees a sustained increase in e-commerce as a percentage of retail sales as a central element of its strategy (see below).
STAG’s addressable market is over $ 1 trillion, half of which is made up of single tenants. The sector is highly fragmented, which means that no particular company would have a significant economies of scale. Because of this, STAG believes it can acquire assets at incorrect prices.
STAG believes this is an attractive mix of assets. In combination with relatively low investments and high retention rates, STAG has created a strong portfolio of industrial properties.
STAG’s tenant profile reflects the enormous diversification it has built into its portfolio. The Trust believes that much of the risk of owning individual rental properties is largely diversified. STAG has done a good job in taking over a relatively risky real estate sector – single-tenant properties – and building a portfolio in such a way that much of that risk is diversified away.
STAG Industrial’s growth since going public in 2011 has been impressive from both a fundamental and investor return perspective. Fortunately, this real estate fund is still on a strong growth track.
in the early Can, STAG Industrial reports (5/.4th/.21) Financial results for the first Quarter of fiscal year 2021. The report was great similar to the Previous seven Reports. Core FFO growth13rd% Over latest Quarter of the year thanks to the sustainable Strength of tenants of the REIT. C.Ore FFO per share grew only 4% from $ 0.4$ 7 to $ 0.49, by the extensive issue of new units.
The operating result grew 11% Over latest Quarter of the year and the Occupancy rate of the REIT slightly improved, of 96th.9% to 97th.0%. DEER The industry is facing headwinds due to the resulting recession the pandemic. However, the effect is the pandemic on the REIT has Been limited so far thanks to the high credit profile of its tenants. It is noteworthy that the REIT has collected about 99% of its rental income in the the last four quarters.
The trust continues to invest heavily in new real estate as it expands its portfolio, and much of that funding is coming from new common stock. We anticipate the trust will continue to issue new shares for the foreseeable future to add to its portfolio.
We assume that STAG will probably continue to grow in the mid-single-digit range. Indeed, we forecast 5% annual FFO per share growth over the next five years. The trust still has a very small market share in its target market for real estate assets, so there is plenty of room for expansion.
Source: Investor Presentation
STAG has a highly diversified tenant base, in which almost the entire portfolio consists of tenants with annual sales of at least 100 million US dollars. In addition, the trust has very little exposure to any particular industry or tenant. Diversification will help protect confidence from the effects of the next economic downturn.
The sector’s market momentum is also favorable and has improved significantly in recent years.
With the continued takeover of digital sales channels by retailers, we expect these key figures for the industry and especially for STAG to continue to rise. This will help support growth in the years to come.
The STAG dividend is obviously very important as investors typically own REITs for their payouts. STAG’s payout has increased every year since going public and is now at $ 1.45 per share. However, the growth since 2015 has been very little as the payout was $ 1.36 this year and has only increased by $ 0.09 in the years since.
We don’t see any significant growth in dividends going forward as STAG’s payout ratio, which currently stands at 74% of FFO per share, is still quite high. We believe STAG will see very little gains for the foreseeable future as it reduces the likelihood that a cut would be required during a downturn.
The current payout ratio is down nearly 100% from previous levels as STAG has made concerted efforts to reduce the vulnerability of its dividend. These efforts are still ongoing, however, so we consider significant payout growth unlikely in the short term.
The current payout ratio in combination with the mid-single-digit growth in FFO per share in the coming years should gradually improve the security of the STAG dividend. The trust has also made disposals when prices are cheap, an option it could use to temporarily cover dividend defaults. In short, we think the 4.1% return is pretty safe at this point.
STAG Industrial has two features that appeal to high-income investors immediately: a dividend yield of 4.1% and regular monthly dividend payments. This REIT is still an attractive value at today’s price and yield.
We also like the trust’s strategy for long-term growth in a real estate sector that investors sometimes ignore because of its perceived risk. Therefore, due to its high dividend yield, monthly dividend payments and its leadership position in the commercial real estate market with one tenant, STAG Industrial offers a good potential addition to a high-yield portfolio. Therefore we see STAG today as very attractive and as one of the best monthly dividend stocks.
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