Better Industrial REIT: Stag Industrial or EastGroup Properties?

Real estate investment trusts (REITs) that specialize in warehouses enjoy some insulation against inflation because the leases they sign with tenants typically include automatic annual rent increases that are tied to the inflation rate. Unlike other properties, warehouses are essentially concrete boxes that require few capital expenditures to maintain, so more of the rental income they generate flows straight down to the bottom line as profit that can be passed on to their shareholders.

Industrial REITs also provide a level of stability not seen in other real estate companies because their tenants generally provide essential services such as food distribution, medical supplies, and logistics. Demand for those services remains fairly consistent even during economic downturns.

Two of my favorite warehouse REITs are Stag Industrial (NYSE: STAG) and EastGroup Properties (NYSE: EGP). But which one is the better buy right now?

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What sets EastGroup Properties apart

EastGroup Properties focuses on infill locations: industrial properties in built-out areas close to major population centers. There's little available land left that's appropriate for building new warehouses in these areas, so the REIT is less at risk of facing competition from new developments. That helps EastGroup maintain high occupancy rates and makes it easy for it to raise rents. The company owns 65.1 million square feet of properties, primarily in Texas, Florida, California, Arizona, and North Carolina, and specializes in locations that serve multiple clients that each need between 20,000 and 100,000 square feet of space.

The REIT has increased its dividend for 14 consecutive years and has not cut it in 33 years. Last year, EastGroup raised its quarterly payout by 10.7% to $1.55 per share. At its current share price, the yield is around 3.2%. Over the past decade, it has increased its dividend by 158%.

For REITs, funds from operations (FFO) are a better metric of profitability than net income, and in 2025, EastGroup reported FFO per share of $8.95, up 7.7%. EastGroup is guiding for 2026 FFO per share between $9.40 and $9.60, which would be an increase of 6% at the midpoint. Industrial REITs are considered healthy if their debt-to-market-capitalization ratio is between 25% and 30%, and EastGroup's ratio was only 14.7% at the end of 2025. EastGroup's dividend is well covered, with an FFO payout ratio of 69.2%. That's in a range that would be considered conservative for a REIT. The company's occupancy percentage for its operating portfolio was 96.2%.

What sets Stag Industrial apart

Stag Industrial focuses on single-tenant industrial properties in secondary markets where it faces less competition from other players. It is a huge REIT with 120 million square feet of property at 601 locations spread across 41 states.

Stag is popular with some investors because it distributes its dividends on a monthly schedule rather than quarterly. At its current share price, the yield is around 4.1%. Stag has increased its dividends for 13 consecutive years -- every year since it became a public company. However, its payout growth rate has been much slower than EastGroup's; its dividend is up by only 7.2% over the past decade.

In 2025, Stag reported core FFO of $2.25 per share, up 6.3%, and its FFO payout ratio is only 50.9%, even more conservative than EastGroup's. However, its debt-to-market-cap ratio is around 31.7%, more than double EastGroup's. Its occupancy rate of 97.2% on its operating portfolio is slightly higher than EastGroup's.

The choice isn't that obvious

Stag offers investors a higher dividend yield today, but its FFO growth rate is lower, and its dividend increases have been less impressive than EastGroup's. While Stag is better known, EastGroup appears to be in a slightly stronger position to grow its portfolio and dividend.

However, EastGroup's advantages appear to be baked into its stock price, and it is trading at a price-to-FFO ratio of around 20.6, compared with only 15.4 for Stag Industrial. Considering Stag's greater client diversity and larger portfolio, it makes sense to grab its relatively higher dividend at its current share price.

James Halley has positions in Stag Industrial. The Motley Fool recommends EastGroup Properties and Stag Industrial. The Motley Fool has a disclosure policy.