Dividend Watch: Income from Your Storage Unit Owners (PSA, EXR, SSS, UHAL)

Who hasn’t had a off-site storage unit at some point in their lives?  These are all over the country and they are plentiful.  Some are high-end and some look like trailer parks.  Still, these can offer investors income and appreciation alike.

Public Storage (NYSE: PSA) is a real estate investment trust that has characteristics that might draw in multiple classes of investors.  Certainly you know what the company does as you have probably driven by one of its facilities or have probably even been a client.  It has been argued that there is a glut of storage units across America, but Public Storage has so far proven to be a winner for income investors and moderate growth investors alike.

The company also owns a 49% equity interest in Shurgard Europe. It released earnings and raised its dividend last week.  In that report, its revenues for the Same Store Facilities rose 3.4% and it raised its dividend by nearly 20%.  The company listed some 1,931 facilities that are stabilized and owned since January 1, 2009 with some 121.6 million net rentable square feet that represents about 94% of PSA’s aggregate net rentable square feet of our U.S. consolidated self-storage portfolio.

After looking at the new $0.95 payout and a $116 handle, PSA does still offer new investors a dividend yield of just over 3.25%. Two competitors for storage space are Extra Space Storage Inc. (NYSE: EXR) and Sovran Self Storage Inc. (NYSE: SSS).  Extra Space Storage is also a REIT and it pays a yield of about 2.7%.  Sovran Self Storage is also a REIT and has a higher yield of about 4.4%, but it is smaller and trades with much thinner trading volume each day.  There is also the AMERCO (NASDAQ: UHAL), the parent of U-Haul, but it is not a REIT, it is smaller, it is thinly traded, and it offers no dividend.

A fresh report this morning from Gleacher & Co. remained positive on operational improvements.  It cited increased tenant demand and partly refutes the storage oversupply myth as it noted “the absence of new supply.”  PSA was listed as high occupancy being above 90%, and it noted the seasonally strong second and third quarters ahead.

Gleacher noted acquisition possibilities for the company and talked up its past dividend growth, but also noted, “We maintain a positive stance for the shorter lease sectors such as apartments and storage. PSA offers a mix of both defensive and offensive qualities—defense from its balance sheet strength and well-covered dividend, and offense from improving operations and growth from acquisitions.”

Thomson Reuters has a consensus price target of only $110.58, but Gleacher & Co. reiterated its ‘Buy’ rating and it raised its target by $3.00 to $125.00.  Shares are at $116.51 today and the 52-week range is $85.04 to $118.88.

JON C. OGG