Investing

5 Buy-Rated Big-Dividend REITs That Carry Incredibly Low Investment Risk

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If there is one problem that most Americans share, it is that we have too much stuff. While in places like the South or warmer regions many people can use their garage for storage, that is not really a solution for those in the North or areas that see large amounts of rainfall each year. The solution for all that stuff? Renting a self-storage unit that is locked, safe and close by, so it is easy to retrieve all that stuff.
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The self-storage business is massive, and self-storage real estate investment trusts (REITs) can be outstanding investments. One of the biggest compelling reasons for investors is that when compared to office, business or apartment REITs, the initial and forward fixed costs of doing business can be much less on an annual basis.

The analysts at Stifel are very positive on the group. In a new research report, they feel the future is bright for the industry and had this to say when discussing the stocks under coverage:

We remain Buy rated on all 5 self-storage REITs. All beat our fourth quarter funds-from-operations estimates and recent updates indicate demand remains robust. While REIT 2022 guidance was strong, concerns about same-store net-operating-income (NOI) and bottom-line growth being similar popped up. This implies a drag from non-same store NOI growth that offsets the beneficial impact of financial leverage. We see guidance as management teams being conservative, especially in the second half of 2022, rather than any signal that cracks are appearing. However, we know this high level of growth isn’t sustainable in the long-term. We see two possible causes of a reversal (1) decreasing demand and/or (2) increasing development. Development isn’t a concern yet, 2021 deliveries were below expectations (due to difficulty in finding labor, higher costs, lengthening time for planning/approvals) and are about 22% below peak (per Yardi data). And while move outs are increasing (from historic lows), those newly created vacancies don’t last long (occupancy remains in mid to high 90s). We expect this benign environment to remain for at least the next 12-18 months. Despite this, valuations remain attractive, with Self-Storage REITs multiples only 11% above the REIT Universe (14% historic average), despite the former having two times the growth rate this year.

Even though these five top stocks are rated Buy at Stifel, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

CubeSmart

This REIT may seem an odd beneficiary of rising rates, but it should benefit. CubeSmart (NASDAQ: CUBE) is a self-administered, self-managed REIT. Its self-storage properties are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers. According to the Self-Storage Almanac, CubeSmart is one of the top three owners and operators of self-storage properties in the United States.
In a rising rate environment, hard assets like real estate gain in value, and the self-storage REITs are also in a good position as capital expenditures and the need for additional capital are often very low.

Shareholders receive a 3.50% distribution. Stifel’s price target on the shares is $62, and the consensus target is $59.60. CubeSmart stock closed on Wednesday at $49.66 per share.

Extra Space Storage

This top REIT has very solid upside potential for investors and is a top pick across Wall Street. Extra Space Storage Inc. (NYSE: EXR) is a fully integrated, self-administered and self-managed REIT headquartered in Salt Lake City, Utah. Like many self-storage companies, Extra Space offers rentable storage space offering customers conveniently located and secure storage units across the country, including boat storage, recreational vehicle storage and business storage.

At the beginning of 2021, the company owned or operated 1,971 self-storage stores in 40 states, the District of Columbia and Puerto Rico. The portfolio consists of approximately 149.2 million square feet of rentable space and 1.4 million units, making the company the second-largest owner/operator of self-storage stores and the largest self-storage management company in the country.

Holders of Extra Space Storage stock receive a 3.16% distribution. The Stifel price target is $230, while the consensus target is $221.11. Shares closed at $193.41 on Wednesday.

Life Storage

This more off-the-radar play looks solid for 2022. Life Storage Inc. (NYSE: LSI) is a self-administered and self-managed equity REIT that is in the business of acquiring and managing self-storage facilities.

Located in Buffalo, New York, the company operates more than 900 storage facilities in 30 states and in Ontario, Canada. It serves both residential and commercial storage customers with storage units rented by month. Life Storage consistently provides responsive service to approximately 500,000 customers, making it a leader in the industry.

Shareholders receive a 3.08% distribution. The $170 Stifel price target for Life Storage stock compares to a $157.55 consensus target. Wednesday’s final trade was reported at $132.35.

National Storage Affiliates

This $5.5 billion market cap company also comes in with a very solid and dependable distribution. National Storage Affiliates Trust (NYSE: NSA) is a Maryland REIT focused on the ownership, operation and acquisition of self-storage properties located within the top 100 metropolitan statistical areas throughout the United States.
The company is one of the largest owners and operators of self-storage properties among public and private companies in the United States. As of September 30, 2020 (and we looked for more recent numbers), the company held ownership interests in and operated 788 self-storage properties located in 35 states and Puerto Rico, with approximately 49.5 million rentable square feet.

Shareholders receive a 3.36% distribution. Stifel has set a $73 price objective. The consensus target for National Storage Affiliates Trust is $42.60. The stock closed on Wednesday at $60.71 per share.

Public Storage

This giant self-storage leader has always been a go-to REIT stock for income investors. Public Storage Inc. (NYSE: PSA) is a fully integrated, self-administered and self-managed REIT that primarily acquires, develops, owns and operates self-storage facilities.

Once again, we looked for more recent numbers, but as of September 30, 2020, the company had interests in 2,504 self-storage facilities located in 38 states with approximately 171 million net rentable square feet in the United States. It had an approximate 35% common equity interest in Shurgard Self Storage, which owned 239 self-storage facilities located in seven Western European nations with approximately 13 million net rentable square feet operated under the Shurgard brand.

Furthermore, Public Storage had an approximate 42% common equity interest in PS Business Parks, which owned and operated approximately 28 million rentable square feet of commercial space at September 30, 2020.

Investors receive a 2.25% distribution. The price target for Public Storage stock at Stifel is $410. The lower $393.79 consensus target also compares with Wednesday’s final print of $357.72.


Nobody will confuse these stocks with exciting technology innovators. However, for growth and income investors looking for a degree of safety and dependable income, they are just the ticket. Plus all have backed up dramatically in price and are offering among the best entry points this year. It is important to remember that REIT distributions can contain return of principal.

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