Stag Industrial (STAG -0.03%) could be a very good long-term buy for investors looking for steady monthly income from an established player in an industry that appears to have good prospects going forward.

The Boston-based real estate investment trust (REIT) makes its living from renting industrial space nationwide to a mix of clients ranging from air freight logistics to tire distributors, auto component makers, healthcare equipment suppliers, and electronics component manufacturers.

Stag has built a nice record of investor return since going its inception in 2011, helping earn it a place in the income-focused part of a stock portfolio. This chart compares its total return to the benchmark CRSP US Retail Index since the Boston-based trust began paying monthly dividends in 2013.

A portfolio built to continue to outperform

Stag's portfolio currently numbers 562 buildings in 41 states, with an occupancy rate of nearly 99% and an average weighted lease term of nearly five years. While it faces the same economic headwinds as every other publicly held company, Stag also should benefit from continued strong demand for its space going forward.

Prologis, an industry bellwether and thought leader and the largest of all industrial REITs, predicts e-commerce leasing to continue at near-record levels while new warehouse development in the U.S. drops to a seven-year low. The warehouse giant's 2023 supply chain report also predicts rent growth to continue strong across the sector, exceeding 10% again this year.

Stag, for its part, is profiting from that trend with average annual rent escalators of 2.5% over its entire portfolio and cash spreads of nearly 32% in its new and renewed leases. The company also continues to grow funds from operations (FFO) at a nice clip, posting a 7.1% gain in 2022 at $2.21 per share and guiding for $2.22 to $2.26 a share this year.

Helping drive that FFO performance should be same-store NOI growth of 4.5% to 5% this year, the company says, continuing a consistent cash flow has helped the REIT lower its dividend payout ratio from 82.1% to a more comfortable 77.8% by the end of the year, the company says.

Stag stock had plunged to just under $27 last year after hitting a record high close of $45.63 on Dec. 31 and is now selling for about $33 a share. At that level, it's yielding about 4.4% while paying $0.1225 per share per month after five consecutive years of dividend increases.

That yield compares favorably to the 2.6% for market favorite Prologis and 3.8% for the Vanguard Real Estate ETF, a collection of about 160 REITs that serves as a good proxy for the REIT sector. Stag is also a good bit cheaper than the sector leader, selling for about 13.6 times per share FFO compared with a multiple of 18.4 or so for Prologis in that measurement of market valuation.

On sale and on fire

Stag launched a decade ago with 93 properties and 14.2 million square feet of industrial space. It's now several times that size. Interest rate and sale prices for warehouses prompted the company to guide for a wide range of $300 million to $700 million in acquisition volume in 2023, but growing revenue, a strong balance sheet, and a solid niche in a strong business should serve Stag stock well when the market goes from bear to bull, which it inevitably does.

At a share price that's still about 13% down from this point last year, this stock looks like it's on sale. And the company should continue to fuel the fire that can provide warmth to a shareholder's investment house for years to come.