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

Allergan (AGN) Raised to Outperform at Baird.
Burger King (BKC) Cut to Neutral at JP Morgan.
Franklin Resources (BEN) Raised to Buy at Goldman Sachs.
Gap (GPS) Raised to Overweight at Barclays.
Genzyme (GENZ) Cut to Neutral at UBS.
Huron (HURN) Cut to Hold at Deutsche Bank; Cut to Underperform at Oppenheimer; Cut to Underperform at Baird.
3M (MMM) Raised to Buy at Goldman Sachs.
Sovran Self Storage (SSS) Cut to Underperform at Oppenheimer.
Wendy’s (WEN) Raised to Buy at UBS.
United Therapeutics (UTHR) Cut to Hold at Jefferies.

Jon C. Ogg
August 3, 2009

• Chesapeake (CHK) Raised to Outperform at Bernstein.
• Comcast (CMCSA) Raised to Buy at Collins Stewart.
• H-P (HPQ) Raised to Overweight at Thomas Weisel.
• Sanofi-Aventis (SNY) Raised to Neutral at JPMorgan.
• Sovran Self Storage (SSS) Raised to Perform at Oppenheimer.
• Transocean (RIG) Raised to Outperform at Bernstein.
• Whole Foods (WFMI) Raised to Buy at Jefferies.

Jon C. Ogg
February 19, 2009

• Agilent (NYSE: A) Raised to Outperform at Baird.
• Gentex (NASDAQ: GNTX) Raised to Outperform at Baird.
• Pfizer (NYSE: PFE) Raised to Neutral at Goldman Sachs.
• Alcoa (NYSE: AA) Cut to Sell at Deutsche Bank.
• Allergan (NYSE: AGN) Cut to Hold at Lazard.
• Harley-Davidson (NYSE: HOG) Cut to Sell at Goldman Sachs.
• Prestige Brands (NYSE: PBH) Cut to Underweight at JPMorgan.
• Sovran Self Storage (NYSE: SSS) Cut to Underperform at Oppenheimer.
• STMicroelectronics (NYSE: STM) Cut to Sell at UBS.
• Tenneco (NYSE: TEN) Cut to Market Perform at Wachovia.

Jon C. Ogg
January 12, 2009

As u-Store-It was already closer to lows, had seen more selling, is only a $693 million stock market cap, and is generally far less representative of the entire extra-storage space property sector… the sector is following the lead of Public Storage.

Public Storage posted funds from operations excluding items and excluding currency of $1.16, while estimates were $1.24.  The company attributed a shortfall compared to estimates as being due to higher than expected domestic expenses.  The company also showed a decrease in per square foot occupancy from 90.1% in Q1 2007 to 89.5%, although that was offset by a 3.8% increase in rent to $13.82 per annual square foot.

After looking over the books, the company is actually in great shape financially and it should have more than enough to keep repurchasing shares and to keep paying out its dividends.  The bad news is that it is no longer believed to be cheap on an underlying real estate land-bank basis.

With a $14.9 Billion market cap after a 5% drop today to $87.14, this one looks fully valued based on the current valuations and based on the current economic climate.  Its 52-week trading range is $65.66 to $98.01. Five years ago, this was trading at about $36.00 per share.

This is also weighing on a few related companies today. Extra Space Storage Inc. (NYSE: EXR) is seeing shares trade down over 1% at $16.74 and Sovran Self Storage Inc. (NYSE: SSS) is seeing shares down over 1% at $43.13.

Jon C. Ogg
May 9, 2008

• Chipotle Mexican Grill (NYSE: CMG) raised to Outperform at Robert W. Baird.
• Fluor (NYSE: FLR) raised to Buy at UBS.
• Martha Stewart (NYSE: MSO) started as Outperform at RBC Capital.
• Micron Tech (NYSE: MU) initiated as Outperform at Oppenheimer.
• Senior Housing (NYSE: SNH) raised to Buy at UBS.
• Sovereign Self Storage (NYSE: SSS) downgraded to Hold from Buy at Deutsche Bank.
• Viacom (NYSE: VIA.B) raised to Buy at UBS.
• Weight Watchers (NYSE: WTW) raised to Outperform at Oppenheimer.
• Whole Foods (NASDAQ: WFMI) downgraded to Underweight at Lehman.

Jon C. Ogg
February 15, 2008