{"id":52944,"date":"2023-08-25T11:21:48","date_gmt":"2023-08-25T15:21:48","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/stag-industrial-cost-of-capital-exceeds-the-cap-rate-shares-untimely-nysestag\/"},"modified":"2023-08-25T11:21:51","modified_gmt":"2023-08-25T15:21:51","slug":"stag-industrial-cost-of-capital-exceeds-the-cap-rate-shares-untimely-nysestag","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=52944","title":{"rendered":"STAG Industrial: Cost Of Capital Exceeds The Cap Rate: Shares Untimely (NYSE:STAG)"},"content":{"rendered":"
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Introduction<\/h2>\n

One of the salient features of REITs is that profits and prices often move in cycles. And there are two cycles worth considering. First, there is the space market cycle which describes the supply and demand for a type of space. In the case of STAG Industrial, Inc. (<\/span>NYSE:STAG<\/span>), the space would be industrial space that is leased to tenants that have favorable tailwinds. STAG\u2019s tenants are beneficiaries of secular trends with respect to the onshoring of light manufacturing activities and the continued penetration of e-commerce as a method of consumption. The second type of cycle is the capital market cycle. This relates to the level of investor demand for real estate assets and the valuations at which they trade. This article is focused on the capital market cycle and how it affects STAG\u2019s operating performance. In particular, we review the capitalization rate and its spread with the cost of capital. We further consider the capitalization rate of the industrial REIT sector in comparison with the 10-year treasury for the 2010 to 2019 time period. We corroborate our analysis with commentary from the recent earnings call and review the implication of the recent pace of share issuance on operating performance. We tie the different aspects of the analysis together and form a view on the worthiness of an investment in the security in the current environment. At the end of the article, an investment recommendation is presented.<\/span><\/span><\/p>\n

Source: Investing in REITs, Fourth Edition, Ralph L. Block. Published by John Wiley & Sons, Inc. <\/em><\/p>\n

Risk and Return<\/h3>\n

STAG enjoys a BBB rating from Fitch and a Baa3 from Moody\u2019s. Both credit agencies have stable outlooks for STAG. Please take a look at Table 1 which compares the total return that can be earned from an equity interest in STAG and the 5-year median yield on the Corporate Baa\/BBB.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n
Table 1: Comparison Between Equity and Fixed Income Return<\/strong><\/td>\n<\/tr>\n
Equity Return<\/em><\/td>\n <\/td>\nFixed-Income<\/em><\/td>\n <\/td>\n<\/tr>\n
Dividend Yield<\/td>\n4.05%<\/td>\nCorporate (Baa\/BBB) 5-year Median Yield<\/td>\n5.69%<\/td>\n<\/tr>\n
5 Year Dividend Growth Rate<\/td>\n0.70%<\/td>\n<\/tr>\n
Total Return<\/td>\n4.75%<\/td>\n<\/tr>\n<\/table>\n

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