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STAG: Yield, Value and Growth
03/17/2016 8:00 am EST
Our latest recommendation is an industrial real estate investment trust that owns 291 properties spread across 38 states; 87% are warehouse or distribution properties, explains Ian Wyatt, editor of High Yield Wealth.
Industrial real estate is hardly the glamour queen of the REIT sector, but we don't care. We want stability and opportunity to grow both the business and the dividend smartly. STAG Industrial (STAG) offers both.
The opportunity for growth is certainly there. STAG's target asset class tends to be local or regionally owned.
Industrial property ownership is extraordinarily fragmented with the largest owner controlling less than 3% of the market. There is plenty of opportunity for consolidation.
STAG has worked hard to bring institutional efficiency to the warehouse sector. Over the past five years, STAG has acquired over $1.7 billion worth of properties, representing property growth of 305%.
We also like that STAG pays its dividends monthly. The annual dividend payout at the market price produces a 7.4% yield.
STAG also increases its dividend annually. Since its 2011 IPO, the dividend has been increased at a 6% average annual rate.
The REIT gives investors high current income and price-appreciation potential. Better yet, it gives both at a value price.
Shares trade at 12.6 times current FFO compared to a peer average of 17.3 times. The peer average dividend yield is 3.9% compared to 7.4% for STAG.
STAG's shares are also priced significantly below portfolio net asset value (NAV) of $22.15 per share. It is essentially priced at liquidation value, with no consideration for future portfolio growth.
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