1 Month Dividend Share Up for Grab Now

With the boom in e-commerce sales proving quite good for industrial real estate investment trusts (REITs), the stars are also aligning for the REIT space in a few other key ways. As expectations for a September rate cut by the Federal Reserve remain near 100% amid falling inflation, REITs could benefit from lower borrowing costs. Additionally, traditionally high-yield REITs are becoming more attractive to investors as bond yields fall.

With macroeconomic trends changing for the better and in a niche market that is expected to grow by $333.01 billion by 2027, investing in a high-quality REIT could be a smart choice for investors right now. Here’s one industrial REIT that pays investors a monthly dividend – and could also be poised for double-digit growth, according to a recent bullish note from analysts at Wedbush.

About Stag Industrial Stock

Founded in 2010 and headquartered in Boston, Stag Industrial (STAG) specializes in the acquisition and operation of single-tenant industrial properties throughout the United States. The company’s portfolio primarily consists of warehouse and distribution facilities, with a significant portion of the properties leased to investment-grade tenants under long-term leases.

With a market capitalization of $7.3 billion, the REIT’s shares are up only about 1% YTD and 3.2% over the past 52 weeks. That includes STAG’s recent burst of momentum, up 16% from early May lows.

Of course, REITs are popular with many investors because of the steady stream of passive income they provide, with requirements that 90% of net taxable income must be distributed to shareholders.

STAG offers a dividend yield of 3.67%, with a monthly distribution of $0.12 per share. The company has been consistently raising dividends for 11 years.

A solid first quarter for STAG

Stag’s first-quarter numbers were impressive, as both revenue and earnings beat estimates. Core funds from operations (FFO) per share, a key metric for the REIT, rose 7.3% from a year earlier to $0.59, beating the consensus estimate of $0.58. Revenue rose 8.1% year over year to $187.5 million, helped by growth in core rental income.

Over the past 5 years, the company’s FFO CAGR of 3.04% outpaced the industry median of 2.19%. During the same period, Stag’s revenue achieved a CAGR of 14.71%, compared to the industry median of 5.62%.

Same-store cash net income, a measure of the REIT’s operating efficiency and organic growth, increased 7.1% year over year to $139.1 million in Q1. The portfolio load rate was 97.7%, and the retention rate was 84.2%.

Additionally, the company closed the quarter with a cash balance of $69.96 million. Cash available for distribution was $98.1 million during the quarter, an increase of nearly 9% year over year – further strengthening the company’s ability to continue to raise dividends in the future.

Stag’s diverse and growing portfolio

Digging deeper into the industrial REIT portfolio, Stag owns 570 buildings in 41 states. A significant portion of its properties are within 60 miles of Investing in America’s “Megasite” projects, and its tenant base includes major players like Amazon (AMZN) and FedEx (FDX).

In Q1, the company signed 29 leases and purchased a Class A warehouse in Cincinnati, Ohio, for $50.1 million. Additionally, Stag acquired three buildings totaling nearly 3 million square feet—two in South Carolina and one in Tampa—for $85 million.

With a strong focus on e-commerce, Stag boasts a weighted average lease term of 4.4 years. Approximately 75% of its portfolio is located in CBRE Tier 1 markets, known for their growth and attractiveness for property development and leasing. This concentration has resulted in higher than market rents for the REIT.

Analysts are optimistic about the company’s growth prospects, forecasting FFO and revenue growth of 4.19% and 7.51%, respectively – above the sector medians of 1.86% and 4.01%.

How high can STAG go?

Overall, the analyst community has given STAG an average rating of “Moderate Buy.” Out of the 12 analysts covering the stock, 4 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 6 have a “Hold” rating, and 1 has a “Moderate Sell” rating.

The average target price for the stock is $39.77, which is roughly in line with STAG’s current price. However, Wedbush believes the REIT could rise higher, lifted by sector rotation.

Wedbush analyst Richard Anderson recently upgraded Stag Industrial from “Neutral” to “Outperform,” citing expectations of “steady rotation back” into the industrial REIT sector. The analyst also suggested combining STAG with fellow REIT Eastgroup Properties (EGP) for a “combination of momentum and value.”

The newly raised target price for STAG shares on Wedbush is $44, implying a premium of about 11% to Wednesday’s close.

On the date of publication, Pathikrit Bose did not hold (directly or indirectly) a position in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please refer to Barchart’s Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.