Pure-Play REITs: Public Storage (PSA)
PSA is the world’s largest owner and operator of self-storage facilities with over 1 million customers. As America’s preoccupation with owning stuff has grown exponentially in recent years, PSA’s business has come along for the ride.
It’s possible that we’ll suddenly wake up one day and realize this fondness for hoarding things isn’t healthy … but until then PSA is going to continue to thrive in this niche industry.
Of all the pure-play REITs this is the one we should have invested in a decade ago. It’s up 15.1% on annualized basis over the past 10 years, almost 8 percentage points higher than the S&P 500.
PSA fills a need that’s not likely to disappear. In the latest fiscal year ended Dec. 31, 2013, PSA generated core funds from operations of $7.44 — 11.4% higher than in 2012. Same-store rental income increased 5.4% year-over-year due to higher rents and higher occupancies. It’s a winning combination that over time has proved successful. Although it’s only yielding 3.3% at the moment, it’s a very stable stock, having seen a negative return just once in the past decade. I like its odds.