STAG Industrial Gives Investors a Chance to Profit From Industrial Real Estate

In the search for yield, income-seeking investors tend to look at a number of real estate investment trusts (REITs). Depending on their investment focus, REITs offer a variety of end-market exposure, be it retail, data centers, assisted living or industrial manufacturing. That last one, as well as the current dividend yield of 4.8%, brings us to STAG Industrial Inc. , a REIT focused on the acquisition, ownership and operation of single-tenant, industrial properties throughout the U.S. Still, that strategy isn't the only difference between STAG and many other REITs. Another difference is STAG's payment of monthly dividends to shareholders that it declares quarterly. And of interest here, STAG is a company that has a track record of increasing those monthly dividends each year. In 2018, STAG's annual dividend payment to shareholders tallied $1.42 per share, up from $1.35 per share in 2014. And the company is still inching that dividend payment higher. Early in January, STAG announced its monthly dividend payments in the first quarter would be $0.11967, which is up modestly from $0.11833 per month in 2018 and equates to an annual payment of $1.436 per share -- that is, if STAG keeps that payment stream intact. Given the tone of recent economic data that points to a slowing domestic manufacturing economy -- as seen in IHS Markit's U.S. Manufacturing PMI Index, monthly core capital goods orders, and the slowing expansion depicted in the monthly ISM Manufacturing Index -- the question to ask is, How does this all impact STAG's business? Exiting 2018, STAG owned 390 buildings in 37 states, with approximately 76.8 million rentable square feet consisting of 320 warehouse/distribution buildings, 58 light manufacturing buildings, nine flex/office buildings, and three value-add portfolio buildings. Entering 2019, STAG's buildings were 95.5% leased to 349 tenants. No single tenant accounted for more than approximately 2.3% of STAG's annualized, base rental revenue, and no one industry accounted for more than 15% of the company's annualized, base rental revenue. The top three industries were capital goods (15%), automobiles and components (12.5%), and materials (11.1%), and its top five tenants included the General Service Administration (2.3%), followed by XPO Logistics Inc. , at 1.8%, Deckers Outdoor Corp. , at 1.4%, Yanfeng US Automotive Interior at 1.2%, and Solo Cup at 1.2%. Current expectations call for STAG's 2019 revenue to rise about 13% year over year to $396 million, with its EBITDA margin clocking in just under 72%. That conversion should drive healthy operating cash flow yet again at STAG in the coming quarters. And for those wondering, as STAG has increased its footprint over the last few years, its revenue and cash flow have trended higher, year over year, since 2010. While the current view for the 2019 domestic economy is one of slower growth compared to the back half of 2018, it's still growing, with consensus GDP at 2.1%, according to The Wall Street Journal's Economic Forecasting Survey. However, investors who add STAG shares to their holdings for the monthly income stream should be mindful of the monthly economic data and look for the increasing likelihood of a recession. Should that come to pass, we could see STAG's core business come under pressure. That could weigh on the shares and its annual dividends per share. But for now, with the economy still growing, STAG shares make for a nice monthly income stream.

STAG Industrial Gives Investors a Chance to Profit From Industrial Real Estate

Investors can reap a nice monthly income stream through STAG Industrial, which owns tens of millions of square feet of warehouses, distribution centers and light manufacturing facilities.

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