Why You Should Not Buy STAG Industrial Inc (NYSE:STAG) For Dividend
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 7 years STAG Industrial Inc (NYSE:STAG) has returned an average of 6.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether STAG Industrial should have a place in your portfolio. Check out our latest analysis for STAG Industrial
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
Does STAG Industrial pass our checks?
Although REITs are expected to payout a high portion of the earnings, STAG Industrial currently pays out more than double its net income, meaning that dividend is predominantly funded by retained earnings. Furthermore, analysts are forecasting the payout ratio to remain at this high level going forward, leading to a future of uncertainty around the stability of STAG’s dividend income. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider STAG Industrial as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, STAG Industrial has a yield of 6.00%, which is high for REITs stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in STAG Industrial for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for STAG’s future growth? Take a look at our free research report of analyst consensus for STAG’s outlook.
Valuation: What is STAG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether STAG is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
