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Actionable news in STAG: STAG INDUSTRIAL Inc,

Stag Industrial: Too Expensive

Summary

Stag Industrial's shares have gained ~35 percent YTD.

The REIT recently reported $0.38/share in core funds from operations.

REIT valuations are inflated.

An investment in STAG yields 5.6 percent.

About six weeks have passed since I last covered real estate investment trust Stag Industrial, Inc. (NYSE:STAG), and recommended income investors to wait for a pullback in price before gobbling up some shares in this monthly-paying industrial REIT. Stag Industrial has a lot going for itself, a lot that investors tend to like: Strong core funds from operations covering the REIT's dividend, potential to grow its market share in a fragmented market for industrial properties, and potential to improve capital efficiency on the back of higher occupancy rates.

On the other hand, Stag Industrial's growing valuation has been a bit of a concern to me. When I last covered Stag Industrial in June, "Stag Industrial: Wait For A Pullback", the company's shares were changing hands for ~$23, or ~14.8x annualized Q1-16 core funds from operations, a high price to pay for a cyclically-exposed real estate investment trust.

Fast forward a couple of weeks and Stag Industrial has continued to increase in price, with shares now selling...


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