Looking for Monthly Dividend? Consider a Match Up With STAG

Not all stocks pay dividends to shareholders. Those that do, typically pay dividends quarterly. But in rare cases, dividend stocks pay monthly. This is more advantageous for investors, particularly retirees who might use dividends to pay for everyday expenses. Monthly dividend stocks provide shareholders with a payment each month, rather than every three months. STAG Industrial pays its dividend each month. It also has a high dividend yield of 5%, making this stock particularly attractive for income investors. STAG's Industrial Real Estate Has Big Presence STAG Industrial is an owner and operator of industrial real estate. It is focused on single-tenant industrial properties and has over 400 buildings across 38 U.S. states. STAG Industrial went public in 2011, and has a market capitalization of $3.7 billion. STAG is a real estate investment trust, otherwise referred to as a REIT. The focus of this REIT on single-tenant properties might create higher risk compared to multi-tenant properties, as the former are either fully occupied or completely vacant. However, STAG Industrial executes a deep quantitative and qualitative analysis on its tenants. As a result, it has incurred credit losses that have been less than 0.1% of its revenues since its IPO. As per the latest data, 55% of the tenants are publicly rated and 30.4% of the tenants are rated investment grade. The environment is favorable for STAG right now, as interest rates are on the decline. Like most REITs, STAG Industrial is negatively affected by rising interest rates. As interest rates rise, REIT valuations typically suffer as the companies are pressured by higher interest expenses. Rising interest rates also force REITs to refinance their debt at higher rates when it comes due. That said, the Federal Reserve has adopted a dovish stance in recent months by lowering the Fed Funds rate. Solid Growth Prospects The future outlook remains stable, and supportive of modest growth for STAG. In late July, STAG Industrial reported financial results for the second quarter of fiscal 2019. Its core funds from operations -- or FFO -- increased 22% over last year's quarter thanks to the strength of the industrial market. But its core FFO on a per-share basis remained flat at 45 cents due to extensive issuance of new shares. As a REIT, STAG's future growth will be primarily fueled by acquisitions of new properties. The company maintains a steady pace of property acquisitions. Last quarter, the REIT acquired 14 buildings for $260 million at an average capitalization rate of 6.1% and achieved an occupancy rate of 95.0%. STAG Industrial has grown FFO at a nearly 6% annual rate since its IPO. It has a large addressable market, as the company has a market share that is less than 1% of its target market. Therefore, it has ample room to continue to grow for years and hence it can be reasonably expected to keep growing at its recent pace in the upcoming years. Indeed, the growth opportunities are compelling for STAG, given its niche. The company believes that single-tenant industrial properties are prone to greater mispricing, as investors tend to apply greater discounts to single-tenant assets vs. multi-tenant properties. As a result, STAG believes it can take advantage of the mis-pricings in this fragmented market. Separately, industrial real estate is relatively attractive compared with other real estate asset classes, as it widely has lower capital expenditure needs along with higher retention rates. In addition, e-commerce is a major tailwind for industrial real estate properties. The e-commerce boom in the U.S. shows no signs of slowing down. According to the company, e-commerce accounts for 10% of U.S. retail sales, and is projected to grow to 23% by 2025. These tailwinds should provide STAG with a long-term growth tailwind. Expect Good Returns Investors will likely find STAG to be an attractive stock, because of its dividend program. The stock has a high yield of 5% currently, and STAG pays its dividend in monthly installments. The company has also grown its dividend modestly for many years. And, the dividend appears to be sustainable. In terms of FFO, the company is projected to have a 2019 dividend payout ratio of 78%. This is a manageable payout ratio for a REIT. STAG shares trade for a price-to-FFO ratio of 15, which is a fair valuation for a well-run REIT. As a result, the stock can generate satisfactory returns over the next several years, even if the valuation multiple remains flat. For example, projected FFO growth of 5% per year plus the 5% dividend yield would lead to annual returns of 10%. This means STAG can generate double-digit returns on an annual basis, if the valuation multiple simply remains at its current level. One potential risk to the dividend would be a deep and protracted recession. Due to its focus on industrial properties, the REIT is vulnerable to recessions. As a recession has not occurred for a decade, investors should certainly take this risk factor into account. Overall, STAG Industrial is likely to keep raising its dividend at a slow pace until a recession shows up. STAG Industrial continues to grow thanks to favorable economic conditions. In the absence of a recession, this REIT could offer an approximate annual return of 10% per year, if the company meets its growth objectives and continues to pay its hefty dividend. High Yield + Monthly Dividend = Bonus REITs are highly appealing for income investors due to their dividend payouts, and STAG is no exception. It has a 5% yield, and while there are other REITs with higher yields than STAG, it offers a sustainable yield backed by a strong business model. In addition, STAG pays its dividend each month, which provides shareholders with more frequent income than quarterly dividend stocks. These qualities make STAG an attractive stock for income investors.

Looking for Monthly Dividend? Consider a Match Up With STAG

STAG Industrial is a real estate investment trust that offers a 5% yield and frequent dividends that could help retirees and others on fixed incomes.

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