Monthly Dividend Stock Series – Pt 2
Welcome to part 2 of our analysis series looking at stocks that pay monthly dividends. In this edition, we are looking at another specialist REIT; STAG Industrial (NYSE: STAG)
Monthly Dividend Stock Number 2: STAG Industrial
STAG Industrial is a specialized REIT that owns industrial property across the United States. The trust has its initial public offering (IPO) in 2011, and now has a market capitalization of $4.4 billion. It is listed on the New York Stock Exchange).
This popular REIT is one of 3 we featured in a recent article covering 3 REITs that pay monthly income. This particular trust currently owns around 450 sites, focusing largely on single-tenant properties. It mostly owns buildings that form part of the ‘essential’ supply chain, with almost half of it’s assets housing businesses in the growing e-commerce sector. This has made the stock fairly weatherproof when it comes to issues facing the traditional high street retail sector at the moment.
One particular strength of STAG is the quality of its tenant vetting. It provides quality space for quality businesses. This has resulted in very low credit losses since its IPO. More than half of its tenants are publicly rated, and about one third are considered ‘investment grade’.
Solid Growth and Monthly Income
All of the key metrics for STAG are on the up. In May, 2020, the trust reported that core FFO for the business as a whole grew by 33 per cent (33%) year-on-year. However, STAG has issued more units, so core FFO per share rose only 4 per cent (4%) in the same period. Net operating income from the first 32 months of 2020 was up 25 per cent (25%) compared to Q1 2019. Overall, STAG has an occupancy rate of more than 96 per cent (96%).
STAG is doing fairly well despite the Coronavirus crisis. This is due to the quality of its tenants and the fact that the e-commerce sector has been somewhat resilient to the economic impact of shops closing their doors. Rent collections remain high at over 90 per cent (90%) for March and April.
Average FFO growth over the last seven years suits at just under 6 per cent (6%). Analysts expect this to continue at a rate of around 5 per cent (5%) moving forward as STAG captures more market share in the industrial real estate market segment.
While the stock is considered fairly expensive by most analysts due to its price-to-FFO ratio of 16.4, it’s solid underlying fundamentals and forward dividend growth projections make it a strong buy for investors seeking the build up their monthly dividend income.
For more useful articles like this, visit Garnaco’s blog. You can access all of the Monthly Dividends Stock Analysis Series at the links below:
- Monthly Dividend Stock Series 1 : Realty Income
- Monthly Dividend Stock Series 2: STAG Industrial
- Monthly Dividend Stock Series 3: Main Street Capital
- Monthly Dividend Stock Series 5: Shaw Communications
- All 53 Stocks That Pay Monthly Dividends
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