Many catalysts exist. The dividend yield on Stag Industrial is roughly 4%. That big reward is sustainable. The industrial REIT signs long-term contracts with clients (weighted average lease period 4.5 years) that increase lease rates by 2.7% every year.
Those traits give it consistent and expanding cash flow. It provides 75% of its cash for dividends, which is cautious. It can keep $90 million annually for fresh investments. Stag Industrial's excellent financial sheet and low leverage ratio (5.0 to 5.5 times) boost its dividend.
The company's strong finances allow them to buy more income-generating industrial sites. This year, Stag Industrial plans to buy $350 million to $650 million in properties. These deals should boost cash flow.
Finally, lease expirations are the biggest catalyst. Stag Industrial isn't completely capturing the industrial rent spike due to its long-term leases. As existing leases expire and reprice to considerably higher market rents, Stag expects cash rent on new and renewal leases to rise 25% to 30% this year, driving 5% same-store net operating income growth. Add rapid rent growth, acquisition upside, and a greater dividend yield, and Stag might produce strong overall returns.
Great value Realty Income pays about 6% dividends. Higher interest rates have boosted the REIT's stock price, resulting in a significant payment. Despite being a stronger corporation, shares are 25% below their early 2022 high.
Spirit Realty was acquired by the REIT lately. It has also acquired $9 billion in property in the last two years. These transactions have diversified its portfolio and increased rental income, allowing it to raise its dividend.
Realty Income delivers a steady monthly dividend like Stag Industrial. Its real estate holdings is leased for long periods. Its dividend payout ratio is low and its balance sheet is strong. It can afford to buy income-producing property due to these considerations. Realty Income expects to grow adjusted FFO by 4% to 5% per share annually. That and its strong yield should give the REIT a 10%+ average yearly total return.
Several value drivers MAA yields 4.5%. Its stock price dropped more than 40% from its peak before rates rose in 2022, contributing to its high yield.
In coming years, the Federal Reserve should cut interest rates, easing that headwind. Additionally, the apartment REIT should see rent growth rebound. While rentals across its portfolio grew 7% last year, new unit supply in its markets slowed growth in the second half.
We expect that the volume of new apartment deliveries will start to decline in late 2024, setting the stage for improved rent growth," CEO Eric Bolton remarked in the fourth-quarter earnings press release.
MAA aims to pursue new growth possibilities and accelerate rent growth. Five housing developments are under construction for completion in two years. It could start four to six more projects in 18–24 months. It also bought two new multifamily developments. It can take advantage of new development and acquisition opportunities due to its solid balance sheet. These drivers, stronger rent growth, and falling interest rates could boost MAA in the coming quarters.
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