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6 Reasons to Add Public Storage (PSA) Stock to Your Portfolio
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Public Storage (PSA - Free Report) is one of the largest owners and operators of storage facilities in the United States. The Public Storage brand is the most recognized and established name in the self-storage industry, with its presence in all the major metropolitan markets of the country.
Apart from benefiting from brand recognition, the company is likely to gain from economies of scale. Moreover, Public Storage remains poised to benefit from its approximately 35% stake in Shurgard Self Storage SA. The Shurgard brand, used by Shurgard Europe, is a well-established and valuable brand in Europe.
Shares of PSA have outperformed its industry in the past three months. The company’s shares have rallied 14.3%, while the industry has risen 7.7%.
Image Source: Zacks Investment Research
This Zacks Rank #2 (Buy) stock is likely to rally further in the near term on several favorable factors.
Factors That Make Public Storage a Solid Choice:
Expansion Efforts & Technology Investments: Public Storage has been capitalizing on growth opportunities. In the June-end quarter, Public Storage acquired 10 self-storage facilities comprising 0.7 million net rentable square feet of area for $123.6 million. Following Jun 30, 2022, the company acquired or was under contract to acquire 24 self-storage facilities spanning 1.7 million net rentable square feet of space across 10 states for $257.4 million.
In the second quarter, this REIT completed several expansion projects with 0.3 million net rentable square feet and costing $36.9 million. Finally, as of Jun 30, 2022, PSA had several facilities in development (2.6 million net rentable square feet) with an estimated cost of $480.3 million and expansion projects (2.8 million net rentable square feet) worth $547.0 million.
The company is also leveraging technology for revenue optimization and cost efficiencies and has invested in technologies over the past few years. Such efforts are likely to further bolster PSA’s competitive edge.
Healthy Asset Fundamentals: The self-storage asset category, which is need-based and recession-resilient in nature, has low capital expenditure requirements and generates high operating margins. The self-storage industry continues to benefit from favorable demographic changes. Also, the migration and downsizing trend and an increase in the number of people renting homes have escalated the needs of consumers to rent space at a storage facility to park their possessions. Further, the demand for self-storage space has increased amid the flexible working environment.
Strong Operating Performance: Public Storage's second-quarter 2022 core funds from operations (FFO) per share of $3.99 surpassed the Zacks Consensus Estimate of $3.92. The figure also increased 26.7% year over year. Quarterly revenues of $1.03 billion exceeded the Zacks Consensus Estimate of $1.02 billion. Moreover, revenues increased 24.45% year over year. Results reflected an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions.
For 2022, Public Storage now projects core FFO per share in the range of $15.00-$15.70 compared with the prior guidance in the band of $14.75-$15.65. The Zacks Consensus Estimate for the same stands at $15.56. The company’s full-year assumption is backed by 12-15% growth in same-store revenues, a 6% to 8% rise in same-store expenses and a 13.4% to 18.0% expansion in same-store NOI. Further, the company expects $1 billion of acquisitions and $250 million of development openings.
Balance Sheet Strength: Public Storage has one of the strongest balance sheets in the sector with adequate liquidity to withstand the current challenging times and bank on expansion opportunities through acquisitions and developments. Public Storage exited the second quarter of 2022 with $1.01 billion of cash and equivalents, up from the $734.6 million recorded at the end of 2021. The company maintains a strong financial profile characterized by solid credit metrics, including low leverage relative to its total capitalization and operating cash flows, and enjoys an “A” credit rating from Standard & Poor’s and an “A2” from Moody’s.
The sturdy credit profile and ratings enable the company to access both public and private capital markets to raise capital at favorable rates. PSA seems well-poised to take advantage of a potential opportunity.
Superior Cash Flow Growth and High ROE: Public Storage’s current cash flow growth is projected at 39.58% compared with the 9.64% growth projected for the industry. Moreover, this REIT’s trailing 12-month return on equity (“ROE”) highlights its growth potential. Public Storage’s ROE is 40.19% compared with the industry’s average of 3.60%. This reflects that the company reinvests more efficiently compared with the industry.
With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities, which will likely increase.
Dividend Payouts: Solid dividend payouts are arguably the biggest enticements for investments in REIT stocks. The successful execution of such growth strategies and efforts to enhance the operating platform have enabled the company to see a 10% CAGR in dividends per share since 2005.
Given the company’s financial position compared with that of the industry, its current dividend payout is expected to be sustainable.
Other Key Picks
Some other key picks from the REIT sector include Prologis (PLD - Free Report) and Extra Space Storage Inc. (EXR - Free Report) .
Prologis carries a Zacks Rank of 2 at present. Prologis’ long-term growth rate is projected at 9.8%. The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised marginally upward in the past month. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Extra Space Storage’s 2022 FFO per share has moved marginally upward in the past week to $8.37. Extra Space Storage’s long-term growth rate is projected at 8.2%. EXR presently carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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6 Reasons to Add Public Storage (PSA) Stock to Your Portfolio
Public Storage (PSA - Free Report) is one of the largest owners and operators of storage facilities in the United States. The Public Storage brand is the most recognized and established name in the self-storage industry, with its presence in all the major metropolitan markets of the country.
Apart from benefiting from brand recognition, the company is likely to gain from economies of scale. Moreover, Public Storage remains poised to benefit from its approximately 35% stake in Shurgard Self Storage SA. The Shurgard brand, used by Shurgard Europe, is a well-established and valuable brand in Europe.
Shares of PSA have outperformed its industry in the past three months. The company’s shares have rallied 14.3%, while the industry has risen 7.7%.
Image Source: Zacks Investment Research
This Zacks Rank #2 (Buy) stock is likely to rally further in the near term on several favorable factors.
Factors That Make Public Storage a Solid Choice:
Expansion Efforts & Technology Investments: Public Storage has been capitalizing on growth opportunities. In the June-end quarter, Public Storage acquired 10 self-storage facilities comprising 0.7 million net rentable square feet of area for $123.6 million. Following Jun 30, 2022, the company acquired or was under contract to acquire 24 self-storage facilities spanning 1.7 million net rentable square feet of space across 10 states for $257.4 million.
In the second quarter, this REIT completed several expansion projects with 0.3 million net rentable square feet and costing $36.9 million. Finally, as of Jun 30, 2022, PSA had several facilities in development (2.6 million net rentable square feet) with an estimated cost of $480.3 million and expansion projects (2.8 million net rentable square feet) worth $547.0 million.
The company is also leveraging technology for revenue optimization and cost efficiencies and has invested in technologies over the past few years. Such efforts are likely to further bolster PSA’s competitive edge.
Healthy Asset Fundamentals: The self-storage asset category, which is need-based and recession-resilient in nature, has low capital expenditure requirements and generates high operating margins. The self-storage industry continues to benefit from favorable demographic changes. Also, the migration and downsizing trend and an increase in the number of people renting homes have escalated the needs of consumers to rent space at a storage facility to park their possessions. Further, the demand for self-storage space has increased amid the flexible working environment.
Strong Operating Performance: Public Storage's second-quarter 2022 core funds from operations (FFO) per share of $3.99 surpassed the Zacks Consensus Estimate of $3.92. The figure also increased 26.7% year over year. Quarterly revenues of $1.03 billion exceeded the Zacks Consensus Estimate of $1.02 billion. Moreover, revenues increased 24.45% year over year. Results reflected an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions.
For 2022, Public Storage now projects core FFO per share in the range of $15.00-$15.70 compared with the prior guidance in the band of $14.75-$15.65. The Zacks Consensus Estimate for the same stands at $15.56. The company’s full-year assumption is backed by 12-15% growth in same-store revenues, a 6% to 8% rise in same-store expenses and a 13.4% to 18.0% expansion in same-store NOI. Further, the company expects $1 billion of acquisitions and $250 million of development openings.
Balance Sheet Strength: Public Storage has one of the strongest balance sheets in the sector with adequate liquidity to withstand the current challenging times and bank on expansion opportunities through acquisitions and developments. Public Storage exited the second quarter of 2022 with $1.01 billion of cash and equivalents, up from the $734.6 million recorded at the end of 2021. The company maintains a strong financial profile characterized by solid credit metrics, including low leverage relative to its total capitalization and operating cash flows, and enjoys an “A” credit rating from Standard & Poor’s and an “A2” from Moody’s.
The sturdy credit profile and ratings enable the company to access both public and private capital markets to raise capital at favorable rates. PSA seems well-poised to take advantage of a potential opportunity.
Superior Cash Flow Growth and High ROE: Public Storage’s current cash flow growth is projected at 39.58% compared with the 9.64% growth projected for the industry. Moreover, this REIT’s trailing 12-month return on equity (“ROE”) highlights its growth potential. Public Storage’s ROE is 40.19% compared with the industry’s average of 3.60%. This reflects that the company reinvests more efficiently compared with the industry.
With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities, which will likely increase.
Dividend Payouts: Solid dividend payouts are arguably the biggest enticements for investments in REIT stocks. The successful execution of such growth strategies and efforts to enhance the operating platform have enabled the company to see a 10% CAGR in dividends per share since 2005.
Given the company’s financial position compared with that of the industry, its current dividend payout is expected to be sustainable.
Other Key Picks
Some other key picks from the REIT sector include Prologis (PLD - Free Report) and Extra Space Storage Inc. (EXR - Free Report) .
Prologis carries a Zacks Rank of 2 at present. Prologis’ long-term growth rate is projected at 9.8%. The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised marginally upward in the past month. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Extra Space Storage’s 2022 FFO per share has moved marginally upward in the past week to $8.37. Extra Space Storage’s long-term growth rate is projected at 8.2%. EXR presently carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.