Stag Industrial (NYSE: STAG) is a relatively young real estate investment trust (REIT) that has gained a good reputation. It has consistently increased its dividend annually for over a decade. However, there is another REIT worth considering before investing in Stag. W.P. Carey (NYSE: WPC) has a similar focus, more diversification, and a longer track record of annual dividend hikes. Additionally, it offers a higher yield.
Here’s why you might prefer W.P. Carey over Stag:
W.P. Carey has a more attractive yield
REITs are income investments that allow investors to benefit from cash flows generated by institutional-level properties. When comparing Stag and W.P. Carey, it’s logical to start with dividend yield. Stag’s yield is currently 4%, slightly below the average REIT yield of roughly 4.6% using Vanguard Real Estate Index ETF as a benchmark. W.P. Carey’s yield is 6.7%. This means that W.P. Carey can provide a larger passive income stream.
W.P. Carey has a more impressive history
Stag held its initial public offering in 2011, while W.P. Carey held its IPO in 1998. However, W.P. Carey has been in business for 50 years and was a key player in popularizing the sale/leaseback net-lease business model. W.P. Carey has a proven track record of rewarding investors even during difficult times, including the dot-com bust, the Great Recession, and the coronavirus pandemic. On the other hand, Stag only boasts surviving the pandemic as extreme adversity.
Notably, W.P. Carey has increased its dividend annually since its IPO, just like Stag. However, W.P. Carey has a longer streak of dividend increases.
The 2 REITs have similar, but different, business approaches
Both Stag and W.P. Carey focus on net-lease properties, which require tenants to pay for most property-level operating costs. This makes it a relatively low-risk way to invest in real estate. While both REITs have large portfolios, their asset class focus differs. Stag owns mainly industrial properties in North America, while W.P. Carey’s portfolio also includes warehouse, industrial, retail, office, and self-storage assets. Approximately 35% of W.P. Carey’s rents are derived from outside North America, making it a more diversified REIT.
A reliable long-term holding
Stag’s focus on industrial properties gives it a stronger growth platform due to rising lease rates in the sector. However, W.P. Carey offers a higher yield to compensate for this and provides added diversification for long-term investors seeking a reliable passive income stock. If you are considering Stag, it’s worth closely examining W.P. Carey, even though they operate in different niches of the REIT universe.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.