Stag Industrial: Is The Sudden CFO Departure A Red Flag?

| About: STAG Industrial, (STAG)


REIT Stag Industrial announced the sudden departure of its CFO last week.

Abrupt CFO departures are not a good thing, and may or may not point towards other problems within an organization.

Are the current developments at Stag Industrial a red flag for REIT investors?

Stag Industrial Inc. (NYSE:STAG) has received positive coverage from contributors here on Seeking Alpha as well as on other financial websites geared towards retail stock investors. I myself have covered the industrial real estate investment trust twice in the last couple of months because the REIT is a promising income vehicle and was thrown under the bus lately when stock markets went into a tailspin.

Stag Industrial does indeed bring a lot to the table for income investors. The REIT is actively acquiring and growing its portfolio of single-tenant, industrial properties in the U.S. Further, Stag Industrial has sold off lately and the REIT's stock has become compelling from a valuation and yield point of view. Most recently, STAG's cash flow yield crossed the 8% mark. At the time of writing STAG sells for a 8.21% dividend yield based on a monthly dividend payout of $0.1158/share.

I have singled out Stag Industrial earlier in January as a promising REIT play on income AND growth. Importantly, the monthly dividend schedule made the industrial REIT especially appealing for income investors looking for a steady dividend paycheck. But while I like Stag Industrial's business, property portfolio, valuation and yield, I absolutely don't like the sudden CFO replacement that rightfully raised some eyebrows last week.

On Tuesday last week, Stag Industrial put out this press release:

BOSTON, Jan. 26, 2016 /PRNewswire/ -- STAG Industrial, Inc. (the "Company") today announced that it and Geoffrey G. Jervis, the Company's Chief Financial Officer, Executive Vice President and Treasurer, mutually agreed that Mr. Jervis's employment with the Company would terminate so that Mr. Jervis could pursue other opportunities.

"On behalf of the board of directors and management, I want to thank Geoff for his invaluable contributions to STAG during his tenure. We wish him continued success in his future endeavors," said Benjamin S. Butcher, Chief Executive Officer of the Company.

The Company also announced the appointment of William R. Crooker as Chief Financial Officer, Executive Vice President and Treasurer, effective immediately.

While I have little concerns regarding the qualifications of the new Chief Financial Officer, the abrupt departure of Mr. Jervis raises questions as to why the employment was terminated. Of course, unless the company enlightens shareholders and names the real reason for the termination, all of us can only speculate why the things played out the way they did.

That said, though, I think it is safe to say that the quick and (probably) unplanned departure of a senior executive, especially when it is the Chief Financial Officer and Treasurer, is often a red flag, and a questionable development from a shareholder point of view. Sudden CFO replacements are viewed suspiciously, and may or may not point towards other issues within an organization.

Your Takeaway

Though I happen to like Stag Industrial, the immediate departure of the REIT's Chief Financial Officer leaves a bad taste in my mouth. Unplanned CFO changes are not a confidence-builder and can foreshadow deeper seated problems in a corporation. I am not directly invested in Stag Industrial at this point in time, but I'd recommend keeping a close eye on the situation and making STAG only a small portfolio position.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.