Public Storage (PSA) isn’t in the most exciting market sector. But, it’s making some pretty big waves just the same.
This year, the real estate investment trust (REIT) is up 34%, slightly off from its all-time high. It’s been a serious momentum stock, and given the current state of the U.S. economy, it has plenty of juice left.
What’s more, PSA also holds a 49% stake in PS Business Parks (PSB), a REIT that operates multi-tenant flex business and industrial parks in 6 core markets: Virginia, Maryland, Texas, Florida, California and Washington.
Both stocks kick off a 2.7% dividend yield, but PSA stock is a better choice since you get to play both the storage trend as well as the office park trend with one pick.
Also, PSA has consistently raised its dividend year after year. While it might not be a mouth-watering yield, it’s safe and solid. That’s a good thing to have in your portfolio these days.
Why Self-Storage REITs and PSA Are Doing So Well
When there is an economic downturn and people are forced to look for new opportunities outside of their current location, it often means relocating to new cities or states. Usually, if they don’t have any specific prospects, they tend to move to states with low unemployment, i.e., where the economy is doing well.
Very often, these people rent a property until they are more secure and have a better lay of the land. That means some of the stuff they brought with them is better off in storage until a permanent decision can be made.
What’s more, as interest rates begin to increase, mortgage rates will also rise. That will turn off some potential homeowners who will also look to the rental market when selling a home and moving to a new location.
Either way, PSA has plenty of customers: it has 2,000 locations in the U.S. and 200 in Europe. Don’t forget its $1 billion stake in PSB, either.
PSA isn’t just some Johnny-come-lately to an emerging trend. It’s been in business for over 40 years. It has very little debt and expands operations not by taking out loans, but by issuing preferred shares, so the debt stays internal and can be funded through cash flow.
This long history in the industry also means management knows where to build and when. Having facilities in low-growth areas is not going to help PSA stock. PSA has the experience to spot long-term trends and the resources to move into those markets and seize prime real estate.
The REITs have taken a hit with the Federal Reserve’s recent rise, but it was more of a knee-jerk reaction to rising rates. PSA was painted with the brush, but doesn’t fall into a risky REIT category. Use this opportunity to pick up PSA stock slightly cheaper that where it has been trading.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
