Last week, STAG Industrial’s (NYSE:STAG) third quarter results were announced, and from a dividend generation ranking standpoint the figures were slightly better than their second quarter results. The best news is that the company’s FFO per share increased by a whopping 8.3 percent year over year. In addition, STAG’s core funds from operations increased by more than thirty percent. The company has also issued a large amount of equity over the past twelve months.
That being said, STAG Industrial does not demonstrate certain things that we see in other industrial stocks. A factor that we look for is a relatively strong same store NOI, a large factor in measuring internal growth strength. For example, the median sector figure, in Q2, was more than 5 percent. This is a big reason why industrial stocks have been our top fifth sector.
In comparison, STAG has shown a weaker same store NOI. The company has concentrated on acquiring business that are one hundred percent occupied. It is a natural factor that occupancy will decrease over time, which in turn weakens internal growth. In order to put this into perspective, amongst the eight industrial stocks we follow the second lowest same store NOI came in Q2 at approximately five percent. STAG Industrial’s same store NOI was one percent. (-0.4 percent in Q3).
STAG has enjoyed another piece of good news. The company’s retention rate rose to ninety percent after having dropped to twenty nine percent in the second quarter. The amount of expiring square footage has been more significant in Q3 than in Q2 resulting in a more robust Q3 retention figure. Also, STAG’s acquisition pacing continues strong, and their management team has lined up a pipeline that is greater than their market capitalization.
We are not sure if this will improve STAG Industrial’s position in our third quarter rankings. When compared to its industrial peers, the company’s metrics associated with both profitability and dividend distributions have been limited. If STAG had had this same performance in the second quarter, it would not have changed their bottom position at all.
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