Public Storage (PSA); Outstanding REIT hikes dividend by 11% & produces strong FFO growth

 

Public Storage’s (NYSE: PSA) dividend was increased by an impressive 11%. Public Storage is an equity real estate investment trust (REIT). It is the largest owner and operator of self-storage space in the U.S.. The real estate firm holds more than 2200 self-storage locations. It holds key inventory in the fastest growing states in the U.S. including Florida, Texas, and California. Its operations span beyond the United States to include both Europe and Canada. The firm was founded in 1972 and went pubic in 1995. Public Storage has paid dividends consecutively for 23 years. The REIT firm also released its quarterly earnings results on Wednesday.

The Glendale, California-based company reported third-quarter funds from operations (FFO) of $2.51 per share compared with $2.27 a year ago. This was a rise of nearly 5% over last year’s levels. Occupancy for the largest REIT firm stands at 95.3%.  The firm had revenue of $663.15 million for the quarter, which also beat analyst estimates of $624.13 million. The quarterly revenue figures were 7.3% higher than their quarterly revenue in the identical quarter last year. Public Storage also maintains an impressive return on equity of just over 25%. The quarterly dividend for the December payment will be $2.00 versus the prior year rate of $1.80 per share. The overall yield is 3.85%, above that of the S&P 500.

It currently ranks in the top 10% in regard to yield within the large cap REIT firms. Public Storage continues to maintain one of the higher credit ratings in the industrial REIT space, with a solid A rating by Standard & Poors (S&P). REITs were separated from financial stocks in August of this year and are now their own unique sector. Public Storage (NYSE:PSA) qualifies as one of our Top 100 Dividend Stocks.  (see below).

top-100

  • Public Storage is currently priced at $206.75. The new dividend of $2.00 will be paid at the new higher rate on December 29, 2016, to shareholders of record at close of business on December 4, 2016. Listed in the table below are the quarterly dividend payments since 2010.
Date Quarterly Dividend
12/14/2016 2
9/12/2016 1.8
6/13/2016 1.8
3/14/2016 1.7
9/11/2015 1.7
6/11/2015 1.7
3/12/2015 1.4
12/11/2014 1.4
9/11/2014 1.4
6/11/2014 1.4
3/12/2014 1.4
12/11/2013 1.4
9/11/2013 1.25
6/10/2013 1.25
3/11/2013 1.25
12/10/2012 1.1
9/10/2012 1.1
6/11/2012 1.1
3/12/2012 1.1
12/12/2011 0.95
9/12/2011 0.95
6/13/2011 0.95
3/11/2011 0.8
12/13/2010 0.8
9/13/2010 0.8
6/11/2010 0.8
3/11/2010 0.65

Analysis of Public Storage is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 3.85% 68
Dividend Growth (3-6 year avg) 14% 140
Forward P/E 16.76 196
S&P Financial Rating A 120
Beta 0.75 75
Total Score 599

Additional Information;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate FFO 2016 P/FFO Ratio 10 yr P/FFO Low 10 yr P/FFO High 5 yr max Yield % 5 yr lowest Yield %
3.85% 12.4% 15.7% 9.65 21.15 13.9 29.9 3.95% 2.48%

Final Analysis;

Positives;

  • Public Storage’s dividend yield is well above that of the S&P 500 Index.
  • Public Storage maintains an impressive 3 year dividend growth rate of 12.4%.
  • Public Storage has paid out a dividend consecutively for the past 23 years.
  • Public Storage maintains a beta of 0.75, far lower than the average company.
  • Public Storage’s current dividend yield (3.85%) is at the top end of its five-year average historical dividend yield.
  • Public Storage maintains an excellent credit rating; A. This is investment grade.

Negatives;

  • Occupancy rates are at premium levels and real estate pricing for developing new storage facilities is more costly.

The stock price has risen by 72% in the past five years while its FFO has risen from $5.93 to $9.65 over the same time period. Comparing this statistic to many other large cap firms where the stock price has grown much faster than earnings, Public Storage stands out as a very reasonably priced stock.

As Public Storage’s stock has fallen from a price of $276 to $206 since March of this year, we feel the price drop offers investors a compelling opportunity to invest in one of the top dividend stocks within the S&P 500. PSA is a premier REIT company in the U.S. with a stellar 3.85% yield, based upon $8 in upcoming annual dividends. This is the highest yield that PSA has offered investors since January 2014.

Based upon its above average yield, low beta, strong financial rating, and continual double-digit dividend increases, Public Storage (NYSE:PSA) easily qualifies as one of our Top 100 Dividend Stocks.  If you want to find out if a stock is in our model portfolio please subscribe to our monthly newsletter.   

Public Storage Dividend Yield Historical Chart (Click to enlarge) psa2

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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