Stag Industrial (NYSE: STAG) is a relatively young real estate investment trust (REIT) that’s quickly made a good name for itself. For example, it has increased its dividend annually for over a decade. Is an upstart REIT that still has something to prove a safe investment for conservative-leaning income investors?
What if I told you that there is a REIT out there with a similar focus, more diversification, and an even longer track record of annual dividend hikes? That’s W.P. Carey (NYSE: WPC), and it also has a higher yield.
Here’s why you might want to consider buying W.P. Carey over Stag.
REITs are income investments, specifically designed to let investors benefit from the cash flows created from institutional-level properties. So it makes sense to start a comparison of Stag and W.P. Carey with dividend yield. Stag’s yield is currently 4%, which is slightly below the average REIT’s yield of roughly 4.6% using Vanguard Real Estate Index ETF as a proxy. W.P. Carey’s yield is 6.7%. There’s not much more to say on this one — W.P. Carey will provide you with a larger passive income stream today.
Stag held its initial public offering in 2011. W.P. Carey held its IPO in 1998. But it existed long before that, and it was in fact a key player in popularizing the sale/leaseback net-lease business model (more on this below). It is celebrating 50 years in business in 2023. That’s not to suggest that W.P. Carey is inherently better because it has been around longer, but it has managed to live through many more real estate cycles, which suggests it has a very robust business model.
Notably, W.P. Carey’s dividend has been increased annually since its IPO. While Stag can basically say the same thing, the length of the streaks are very different. W.P. Carey has a proven track record of rewarding investors well in both good times and bad, including the dot.com bust, the Great Recession, and the coronavirus pandemic. Stag only has the pandemic to brag about when it comes to surviving extreme adversity.
Both Stag and W.P. Carey focus on net-lease properties. Net leases require tenants to pay for most property-level operating costs. Across a large portfolio, it is a fairly low-risk way to invest in real estate. Both Stag and W.P. Carey have large portfolios.
Where things start to diverge is in the asset class focus of each portfolio. Stag owns industrial properties like warehouses and light manufacturing facilities. These assets make up almost all of the REIT’s portfolio and are all located in North America. W.P. Carey’s portfolio contains warehouse and industrial assets as well, but they account for 24% and 29% of rents, respectively. It also generates roughly 17% of rents from retail, 16% from offices, and 4% from self-storage assets. The rest of rents (about 10%) come from a very diverse “other” category. On top of this, roughly 35% of W.P. Carey’s rents are derived from outside of North America.
This makes W.P. Carey a far more diversified REIT. In many ways, it could be a one-stop shop for investors looking to add broad REIT exposure to their otherwise diversified portfolios. Stag only adds North American industrial properties. That’s not inherently bad, but it means that shareholders need to monitor the dynamics in the industrial sector.
Stag’s industrial focus probably gives it a stronger growth platform today because lease rates are rising quickly in the sector. W.P. Carey simply won’t benefit as much from that dynamic given it only gets about half of its rents from industrial assets. However, the higher yield should compensate for this fact, and the added diversification provides balance for long-term investors who want a reliable passive income stock. If you are considering Stag, you should take a close look at W.P. Carey, even though they tend to be classified into different niches of the REIT universe.
10 stocks we like better than Stag Industrial
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Stag Industrial wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of September 11, 2023
Reuben Gregg Brewer has positions in W. P. Carey. The Motley Fool has positions in and recommends Stag Industrial and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool recommends W. P. Carey. The Motley Fool has a disclosure policy.
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]