Opinions
Joshua Varghese
Public Storage
PSA-N
BUY
Oct 08, 2024
$347.940
Stock price when the opinion was issued
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BUY
Largest self-storage in the US. Premium to NAV in a great space. Likes its capital allocation decisions. The dividend percentage doesn't matter as much as whether cashflow can sustain the dividend. He likes a lower dividend that allows capital retention for repairs and investing in growth.
REAL ESTATE
BUY
Allan Tong’s Discover Picks PSA stock pays a decent 2.77% dividend yield, safe at a 32.51% payout ratio. and trades at a low 11.81x PE. The beta stands at only 0.39, making it super safe from market volatility. PSA shares have come off because some view it as a pandemic play, but that’s unfair. PSA is highly defensive, which investors need as we enter a weakening economy, and the sector as a whole is due for a comeback. A buy. Read Between Safety and Risk: 3 Safe and Gambling Stocks for our full analysis.
REAL ESTATE
TOP PICK
The largest self-storage company in the US. Is growing its fund flows from operations at a high single-digit. They have pricing power as they increase rental rates around 9%. They benefit from sticky, long-term contracts, and are seeing record tenant lengths of stay. They watch costs, like installing solar panels on buildings. The dividend yield is 4.3%, growing around 9%. They grow organically and buying competitors. Trading near the low end of 52 weeks.
(Analysts’ price target is $332.78)
REAL ESTATE
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Customers tend to rent these spaces longer than they expected, and the rates are not crazy. So, it's a good business based on demand. Also, PSA doesn't need to spend much money on these buildings (who cares what their storage space looks like?) compared to an office building. Low capex, so cash flow is strong. PSA is a pioneer in this space and they have grown it well in past decades. A caveat is that low fewer home sales means that fewer people are selling their homes and putting stuff in storage, hence decreasing demand. That said, PSA is a quality long-term hold and lower interest rates will increase demand.