5 Reasons to Buy STAG Stock During the Market Selloff

STAG Industrial (NYSE: STAG) has grown into one of the largest owners of U.S. industrial real estate. Despite impressive growth and a rock-solid balance sheet, STAG stock is selling off as the market enters bear market territory.

After slipping 37% from its all-time high of $48.27 per share, STAG stock is sitting on a 52-week low. STAG is an industrial real estate industrial trust (REIT). In other words, it owns, manages, and rents large buildings to tenants across many industries. For example, a few of STAG’s top tenants include:

• Amazon (Nasdaq: AMZN)
• FedEx (NYSE: FDX)
• Costco (Nasdaq: COST)
• Ford (NYSE: F)

As you can see, STAG purposely works with businesses across many sectors to reduce risk. With 551 buildings across 40 states, the company is building an industrial empire.

The stock market has not been investor-friendly in 2022. Between rising interest rates, escalating tension in Ukraine and inflation growing more than expected, investors are rushing for safety.

But the selloff creates a buying opportunity for a handful of high-quality, long-term stocks. Is STAG stock one of them? Below are five reasons STAG Industrial stock is worth considering.

No. 5 STAG Stock Is on Sale

The nasty market selloff is leaving no safe spots for investors. For instance, energy, the only sector green this year, is down 12% this week.

Meanwhile, after reaching an ATH at the beginning of the year, STAG stock is sitting on support from early 2021. After falling over 37%, STAG’s stock price looks to be a discount compared to its peers.

For one thing, STAG Industrial continues building momentum. Despite its share price slipping, STAG is building momentum in critical areas.

• Occupancy Rate: 96.9%
• Net Income: $52.8 million, up 112%.
• Funds From Operations (FFO): $97 million, up 21%.
• Cash Available for Distribution: $82.4 million, up 13.8%

Despite the progress, STAG stock is getting caught up in the market mix as investors rush to protect their returns since the pandemic.

Even though all Industrial REITs are down this year, STAG shares are down 35% YTD. As a result, investors can buy shares for about the same price from mid-2019. The fallout is creating an attempting entry point as STAG slips below the industry average.

To illustrate, the Vanguard Real Estate Index Fund (NYSE: VNQ) has a Price-to-Earnings of 38.8 compared to STAG stock at 24.5. Although the VNQ is a broad real estate ETF, the fund is the largest holder of STAG Industrial stock. Lastly, STAG sports an FFO multiple of 15.3X compared to its peer average of 27.8X.

No. 4 STAG Is a Top Dividend Stock

With inflation soaring, earning a return on your investments is crucial. STAG stock currently offers a dividend yield (DY) of over 4.6%. In comparison, the VNQ ETF has a yield of 2.2%. Furthermore, STAG’s dividend history is unmatched compared to its closest competitors.

• STAG Industrial: DY = 4.69%, Four-Year Average = 4.56%
• Prologis (NYSE: PLD): DY = 2.75%, Four-Year Average = 2.32%
• Rexford Industrial (NYSE: REXR): DY = 2.11%, Four-Year Average = 1.58%

On top of this, STAG stock pays a monthly dividend compared to most companies paying quarterly. The company’s low leverage and balanced debt maturity help the company fund growth while also rewarding investors.

For instance, in 2021, STAG closed 62 transactions worth over $3.5 billion. That said, the year was significant as retailers (such as Amazon) looked to expand warehouse capacity.

No. 3 Tenants Spread Across Industry, Location and Size

One of STAG’s biggest advantages is the diversity of its portfolio. The company’s largest tenant, Amazon, makes up less than 3.5% of Annual Base Rental (ABR) revenue.

Take a look at STAG’s top ten clients and the percent of ABR.

1. Amazon 3.2%
2. Eastern Metal Supply 1%
3. American Tire Distributions 1%
4. FedEx Corporation .9%
5. Tempur Sealy International .9%
6. Lippert Component Manufacturing .8%
7. Kenco Logistics Services .8%
8. Penguin Random House .8%
9. DS Smith North American .7%
10. Westrock Company .7%

Altogether, the top ten make up less than 11% of ABR. Moreover, the top 20 make up less than 20%. With this in mind, the diversity across industry, size and location helps spread risk. The STAG Industrial portfolio spreads across 60 markets and includes over 45 industries.

Is STAG stock a buy? Keep reading to discover the top two reason STAG is worth considering.

Is STAG Stock a Good Buy

With top-tier clients, solid fundamentals, and a diverse portfolio, STAG stock is a great long-term buy. With compound returns, the 4.6% dividend yield can help you build wealth in the long run.

Not to mention, industrial real estate demand is likely to continue building. New industries s like E-commerce demands more space for storage. STAG stock is down over 35% so far this year. The average price target is $44, suggesting over 45% upside.

For long-term investors, this is an opportunity to buy a premium industrial REIT at a discount. This doesn’t mean STAG stock cannot go lower because it can.

With interest rates rising, STAGs debt can increase, making it harder to fund projects and pay dividends. Not only that, it can make it can be more of a challenge to buy properties.

But, with a long-term mindset (three+ years), STAG Industrial stock looks like a solid buy. The company’s strong client base and proven growth history should help investors holding.