Despite a first-quarter earnings report that didn't blow past analyst estimates, specialty real estate investment trust (REIT) Stag Industrial's (NYSE:STAG) stock price is up since the beginning of this year.

That's an interesting dynamic, but the higher price raises the question of whether the company is still worthy of your investment dollars. Here's my view.

Two men in a warehouse

Image source: Getty Images

Stag hunt

Stag Industrial is a specialty REIT. This puts it in the same market category as much larger peers like Realty Income (NYSE:O), which concentrates on retail space, and medical properties manager Welltower (NYSE:WELL).

Stag Industrial's bread-and-butter is industrial real estate, mainly warehouses and related facilities such as distribution centers. Happily for Stag, the "we'll ship it to you in a day!" trend promulgated by assertive retailers like Amazon (NASDAQ:AMZN) has brought facilities like the ones it operates significant popularity.

The combination of this, plus an active acquisition policy, has lifted the REIT's fundamentals lately. Although Stag Industrial's latest quarterly results saw it beat analyst profitability estimates by only a narrow margin, it still posted robust growth.

Revenue was up by a solid 15% (to almost $96 million), while the all-important profitability metric adjusted funds from operations (AFFO) rose 21% to over $53 million. This, by the way, means an AFFO margin of 56%. Meanwhile, occupancy crept above 95%, 0.5 percentage points higher than same quarter a year ago.

Safe as (ware)houses

Amazon certainly isn't going anywhere; if anything, those ubiquitous boxes with the smiley logo are going to become even more prevalent on our doorsteps and porches. 

Consequently, many prognosticators are anticipating continued growth in demand for industrial spaces. One is CBRE Group's head of industrial research, David Egan.

"The demand is very broad-based and extending all the way down to secondary and tertiary markets," Egan said in an interview with commercial real estate business magazine Bisnow. "My expectation in 2019 is that we should see more or less of the same dynamic."

Leader of the pack Amazon is set to grow even bigger. Collectively, analysts are predicting that the king of online retail's revenue will rise by 18% this year compared to the previous frame, with net profit advancing 35%.

This atmosphere is ideal for an industrial space REIT to thrive, and Stag Industrial is well positioned. As of this past winter, it operated nearly 400 properties for various use cases throughout 37 states. In other words, it can probably find your company a facility whatever its need might be, and wherever it wants to be located.

As a REIT, Stag Industrial is obligated to pay the bulk of its earnings out as shareholder dividends. And those dividends come frequently -- Stag Industrial is one of the few companies anywhere on the stock exchange that hands out a distribution every month (Realty Income is a charter member of this club).

Where Stag Industrial beats Realty Income in this aspect is yield; that dividend is relatively high, even after the recent run-up in price. Stag Industrial's payout yields just under 5%, compared to Realty Income's 3.9%. While we're on the topic of specialty REITs, Stag Industrial's figure also eclipses that of Welltower, which pays out at a 4.7% rate.

Underestimated

On average, analysts aren't predicting hot growth for Stag Industrial. But I think they may be underestimating the sector and the company's success in capturing it.

Stag's inventory is wide and deep, it's clearly taking advantage of a fine market opportunity given its robust profitability, and its area of specialization has a very bright future. And boy, is that dividend attractive. I'd rate the stock a buy regardless of its recent price rise.