STAG - Low Growth Not a Good Fit

04 Feb 2018 18:22
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Earlier this week Stag Industrial (STAG) increased its monthly payout from $0.117 to $0.118, an increase of 0.85%. This is the third year in a row where annual dividend growth is less than 1% and a bit disappointing.

While STAG is a well-managed company it no longer fits into my dividend growth expectations/goals and I will sell my entire position. Hate to sell a consistent monthly dividend payer but with 10 years left until retirement I need something with a better dividend growth rate of at least 2% annually. The biggest question is what to back-fill with.

Selling STAG actually gives me some time to look closer at my REIT diversification. After review I already have a significant position in the industrial & warehouse space through W.P. Carey (WPC) so now would be good time to diversify into a new REIT equity space. Interestingly there have been several articles on Seeking Alpha comparing WPC to Realty Income (O) as to which is the better investment but I just can’t see the comparison. O has a focus on retail space while WPC’s portfolio only has a 16% allocation to retail. If anything I thought comparing WPC to STAG was a better analysis as 44% of WPC’s portfolio is in the industrial warehouse space.

Regardless of the Seeking Alpha articles, I decided to reinvest the STAG proceeds into Iron Mountain (IRM) as I have no position in the data storage space and this will not just help me diversify my REIT holdings but will also provide a 20% income boost as IRM is has a 6.98% yield versus STAG’s 5.75%. The other aspect I like about IRM is its geographic diversification as 33% of its revenue is outside of the U.S. which should provide some buffer to rising interest rates and lower dollar on the foreign exchange.

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