STAG Industrial, Inc. (STAG): A Bull Case Theory

We came across a bullish thesis on STAG Industrial, Inc. (STAG) on Substack by Steve Wagner. In this article, we will summarize the bulls’ thesis on STAG. STAG Industrial, Inc. (STAG)'s share was trading at $33.09 as of May 1^st. STAG’s trailing P/E was 24.88 according to Yahoo Finance.

STAG Industrial (STAG) enters 2025 on solid footing, delivering a strong first-quarter performance that highlights the resilience and growth of its industrial real estate platform. The company’s net income more than doubled year-over-year to $91.3 million, while core FFO rose 3% to $0.61 per share, underscoring its ability to grow recurring earnings even amid macroeconomic uncertainty. Cash NOI grew by 8.1%, and same-store NOI increased 3.4%, reflecting healthy organic expansion across its portfolio. Supported by $106.5 million in cash available for distribution—up 8.5% from the prior year—STAG maintains a well-covered dividend and demonstrates a disciplined approach to managing its capital structure. Portfolio fundamentals remain robust, with occupancy nearing 96% and a strong 85.3% tenant retention rate across 5.5 million square feet of expiring leases. Cash rent spreads of 27.3% on 5 million square feet of new and renewed leases highlight the company’s pricing power in a sector benefiting from e-commerce growth and supply chain reconfiguration. With roughly 80% of 2025 lease volume already addressed, STAG has secured an average 25% cash rent increase, providing clear earnings visibility going forward.

The company’s capital allocation strategy continues to create value through disciplined asset recycling. In the quarter, STAG sold a property for $67 million at a 4.9% cap rate, realizing a $49.9 million gain, and reinvested the proceeds into three new properties acquired at a higher 6.8% cap rate, improving portfolio yield and capital efficiency. Beyond acquisitions, STAG is seeing momentum in development, with its South Carolina project already 100% pre-leased before completion, effectively mitigating lease-up risk. This project exemplifies STAG’s focus on targeted, high-demand regions—like the Southeast—where tenant appetite for modern industrial space remains strong. These initiatives position STAG to capitalize on regional distribution trends and evolving logistics strategies. Management reports strong tenant tour activity and immediate re-leasing in markets like Savannah, reinforcing the company’s competitive positioning and asset quality. While inflation and global trade uncertainty may impact leasing timelines, STAG’s diversified, well-located footprint allows it to weather such volatility with minimal disruption.

Financially, STAG remains conservative yet flexible. The company’s net debt stands at just 5.2× annualized EBITDAre, within its target range and well below covenant limits. With debt comprising only 30% of total asset value and $493 million of available liquidity, STAG has ample capacity to fund new growth initiatives without overextending. Recent capital markets activity demonstrated financial agility, with the company repaying $100 million in notes and issuing $550 million in long-term debt at a weighted average rate of 5.65%, pushing maturities out to 5, 8, and 10 years. This move improves STAG’s duration profile while locking in attractively priced, fixed-rate capital as an investment-grade borrower. Notably, the company’s entirely unsecured debt structure avoids asset encumbrance, giving it significant operational flexibility and reducing future refinancing risk.

Operationally, STAG continues to execute with precision, benefiting from high-quality single-tenant assets in secondary markets that have shown surprising strength. Strong leasing spreads, low downtime, and continued rent escalations speak to the durable demand in this sector, even as some headwinds persist. Management’s ability to sell lower-yielding assets at tight cap rates and reinvest in higher-yielding properties around 6.8% showcases a repeatable strategy that enhances long-term income and value creation. Despite a higher interest rate backdrop and lengthening lease cycles, STAG’s exposure to enduring tailwinds like e-commerce, logistics demand, and supply chain optimization gives it a clear path to continued performance.

At a current share price around $35, STAG trades at roughly 14.6× 2024 Core FFO—a slight discount to industrial REIT peers but reasonable given its focus on less-glamorous, high-performing secondary markets. NAV estimates of ~$36 suggest limited near-term upside, but cap rate compression or a broader valuation re-rating could push shares into the high-$30s. In the meantime, investors are paid to wait with a 4% dividend yield, backed by consistent FFO growth in the mid-single digits. While not a high-beta, deep-value play, STAG offers a compelling risk/reward skew through its reliable income, visible growth, conservative balance sheet, and ability to recycle capital effectively. For long-term investors seeking dependable returns in an uncertain macro environment, STAG remains a well-positioned and well-managed REIT.

STAG Industrial, Inc. (STAG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held STAG at the end of the fourth quarter which was 26 in the previous quarter. While we acknowledge the risk and potential of STAG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than STAG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.