No, this isn’t an article in regards to the prospects of RCI Hospitality Holdings (Nasdaq: RICK), which operates what are euphemistically often called “gents’s golf equipment” – although RCI does supply a tiny dividend. (I assume all these single greenback payments add up.)
Moderately, in the present day I’m discussing a enterprise that operates in a far much less titillating however much more profitable sector – industrial actual property.
Stag Industrial (NYSE: STAG) owns 559 buildings throughout 40 states. Most of them are distribution warehouses or manufacturing amenities. Its prime prospects are Amazon, Japanese Steel Provide and American Tire Distributors.
The actual property funding belief (REIT) pays a $0.12-per-share month-to-month dividend, which comes out to a 4.5% annual dividend yield.
Let’s see whether or not all of these boring buildings will end in shareholders persevering with to receives a commission their dividends…
When analyzing REITs, we take a look at funds from operations (FFO) to find out whether or not an organization can afford its dividend. FFO is a measure of money move utilized by REITs.
Stag’s FFO has been rising strongly and is predicted to extend by 18% this yr.
Final yr, the corporate paid $246 million in dividends, or 74% of FFO. This yr, Stag is forecast to pay $262 million in dividends, or 67% of anticipated FFO.
I’m snug with REITs paying as much as 100% of FFO in dividends. So the truth that Stag Industrial’s payout ratio is so low offers me confidence the corporate wouldn’t have to chop its dividend even when FFO declined within the close to future.
12 Years of Dividend Will increase
Stag has raised its dividend yearly because it started paying one in 2011 (together with a increase in 2011).
Granted, the raises are normally a fraction of a cent on the month-to-month dividend. In 2020, Stag paid out $1.44 per share for the yr. Final yr, the overall annual dividend was $1.45 per share. In 2022, Stag is on tempo to pay $1.46 per share, for a pleasant 4.6% yield.
The yearly raises, nonetheless puny, present Stag’s dedication to its dividend.
Given its low payout ratio and rising money move – and its dozen consecutive annual will increase – Stag’s dividend is secure.
Dividend Security Score: A
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Good investing,
Marc