This Monthly Dividend REIT Yields 7%+: A Cash Flow Machine for Your Portfolio

John Smith

Receiving consistent dividend income can be a great way for investors to generate cash flow. While many solid dividend stocks pay out quarterly, some pay dividends every single month. This provides investors with more frequent income payments.

One such monthly dividend stock that looks particularly attractive right now is STAG Industrial (NYSE: STAG). Here’s a closer look at why this top 10% dividend yield stock could be a great addition to an income-focused portfolio.

Overview of STAG Industrial

STAG Industrial is a real estate investment trust (REIT) focused on owning and operating single-tenant industrial properties across the U.S. As of September 30, 2022, it owned 563 buildings with 106.9 million rentable square feet across 41 states. The company’s properties are used for light manufacturing, e-commerce fulfillment, distribution, and more.

STAG leases its properties to around 370 different tenants, with its largest tenant accounting for only 2.7% of annual base rent. This diversification helps reduce tenant concentration risk. The weighted average lease term is 4.5 years, providing cash flow visibility. Around 43% of leases expire in or after 2028.

Why STAG Offers an Attractive Dividend

STAG Industrial currently pays a dividend yield of 7.3%, making it one of the highest-yielding REITs around. The company has an excellent track record of dividend growth, having increased its payout 109 consecutive quarters since its 2011 IPO.

The industrial real estate sector enjoys sturdy demand thanks to e-commerce and inventory restocking trends. STAG’s properties focus on smaller, single-tenant buildings, which face less oversupply risk than giant logistics warehouses. With a well-located and diversified portfolio, STAG is poised to continue benefiting from favorable industry tailwinds.

The company aims to pay out 100% of its adjusted funds from operations (AFFO) as dividends. Through the first nine months of 2022, its AFFO payout ratio was a conservative 83.5%. STAG’s dividend is amply covered by recurring cash flow.

Importantly, STAG pays dividends every month instead of quarterly. This allows shareholders to accumulate dividend income faster. The consistent monthly income can be attractive for investors who rely on dividends for regular cash flow.

Financial Health Looks Solid

In addition to its generous dividend, STAG also has a healthy balance sheet. The REIT has an investment-grade BBB credit rating from Standard & Poor’s. It maintains reasonable leverage, with a net debt-to-adjusted EBITDA ratio of 4.9x as of September 30, 2022. The company has manageable near-term debt maturities and ample liquidity available on its credit facility.

STAG’s portfolio occupancy rate was 96.1% as of the third quarter of 2022, demonstrating high demand for its properties. The company achieved 14.7% growth in core FFO per share through the first nine months of the year, highlighting its earnings expansion potential.

With a strong portfolio, investment-grade balance sheet, and rising profits, STAG appears well equipped to continue growing its dividend in the years ahead.

Top 10% Dividend Yield

STAG Industrial’s 7.3% dividend yield is attractive on an absolute and relative basis. It ranks in the top 10% of dividend yields among REITs. The company’s payout is almost 3x higher than the S&P 500 average dividend yield.

Many REITs were forced to cut dividends during the COVID-19 pandemic as lockdowns hit certain property sectors especially hard. STAG, on the other hand, continued increasing its payout throughout the downturn thanks to industrial real estate’s resilience.

Rising interest rates have pressured REIT valuations this year, sending the average REIT dividend yield to around 4%. STAG’s yield has increased to 7.3% as its stock price has pulled back in 2022. This presents a better value opportunity for income investors buying shares today.

Risks to Consider

Despite STAG’s strengths, there are some risks for investors to consider:

  • Rising interest rates could continue to put pressure on REIT valuations in the near term. Further stock price weakness could push STAG’s yield even higher.
  • While industrial real estate demand remains robust for now, an economic downturn could lead to elevated tenant defaults.
  • STAG may have difficulty acquiring attractively priced properties in the current high inflation environment.
  • The company is exposed to supply chain disruptions that may disrupt tenants’ businesses.

However, management has steered the business prudently through previous economic and market downturns. The stock’s pullback this year also seems overdone relative to STAG’s healthy fundamentals.

Final Thoughts on This Top Monthly Dividend Stock

STAG Industrial’s high 7.3% dividend yield and monthly payout schedule make it a compelling income stock. The company enjoys strong demand for its industrial real estate and has promising growth prospects.

Though macroeconomic uncertainty has pressured the stock in 2022, shares appear attractively valued at current levels.

For investors seeking a top-tier monthly dividend payer, STAG checks all the boxes. The stock is a noteworthy choice for income portfolios focused on generating steady cash flow.

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John Smith is a veteran stock trader with over 10 years of experience in the financial markets. He is a widely followed market commentator known for his astute analysis and accurate predictions. John has authored multiple bestselling books explaining complex market concepts in simple terms for novice investors looking to grow their wealth through strategic trading and long-term investments.
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