Sovran Self Storage Inc (SSS) — As the fourth largest U.S.-based publically traded self-storage facilities operator, this REIT has benefited from strong demand in the industry. S&P Capital IQ notes this trend should continue due to improving economic conditions, a high divorce rate and people in need of extra storage space that is more cost efficient than owning or renting residential space.
Cost efficiencies have allowed large companies like Sovran to acquire attractive properties from smaller operators and rebrand and reposition them. The company should continue to benefit from ongoing industry consolidation.
In 2015, Capital IQ forecasts year-over-year rental increase per square foot of 4.5%. The rental revenue growth rate is expected to be 11.9% with 50% of that coming from acquisitions. And total revenue is estimated to jump 12.4% this year.
On the earnings front, Capital IQ predicts EPS will increase 15.9% in 2015 to $4.74 and another 6.1% in 2016 to $5.03. Its analysts also recently raised their 12-month target on SSS stock, which they rate a “buy,” by $8 to $103.
SSS stock is in a powerful bull market with support just below its 200-day moving average at $91.30. A bullish arch formed with support at about $88 following the recent broader market sell-off, and despite a 10-point correction, the stock maintained its bullish outlook.
Resistance is currently at a triple-top just over $98, which could easily be pierced. Therefore, my buy under price for SSS stock is $92 with a two-month target of $102, which would result in a gain of 11%, plus a dividend payment. This REIT currently pays a quarterly dividend of 85 cents per share for a forward annual yield of 3.7%.
