Affordable S&P 500 Dividend Shares Slumped by 30%: 4 Reasons to Acquire and Hold Public Storage till 2025 Indefinitely
Between 2020 and 2022, the self-storage REIT giant, Public Storage (PSA), witnessed its share price soar beyond double, thanks to the pandemic-induced boom. However, since reaching its peak, Public Storage's stock has plummeted approximately 30%. It's important to clarify that Public Storage's business operations have remained unaffected, with sales climbing by 12% overall within the last two years. Nevertheless, the REIT failed to generate sufficient cash flow to live up to the financial feats it delivered to shareholders in 2021 and 2022, leaving investors disillusioned.
The self-storage industry's cyclical nature, coupled with market overreaction, has contributed to Public Storage's trading price that now makes it one of my preferred high-yield S&P 500 stocks. Here are four compelling reasons why I plan to strengthen my position in this remarkable REIT by 2025.
The Top 4 Reasons to Invest in Public Storage by 2025
- Leading the Pack as a Premier REIT
With its iconic bright-orange facilities and trademark logo, Public Storage has established itself as the foremost self-storage provider in the United States. To illustrate its powerful network of locations, approximately half of the U.S. population falls within the 'trade area' of one of its facilities.
But what truly sets Public Storage apart is its exemplary financial strength, unparalleled digital transformation, and unmatched cash generation capabilities compared to its competitors.
- Seizing Market Opportunities
Despite Public Storage's dominant market position, it administers only a relatively minor 9% share of the U.S. self-storage market. The vast majority – 80% – of U.S. self-storage lies in the hands of smaller regional and local owners. This fragmented landscape presents Public Storage with ample opportunities for growth through mergers and acquisitions (M&A).
Since 2019, Public Storage has expanded its self-storage footprint by 36% with $11.7 billion in investments, outpacing its competitors. This expansion, accentuated by Public Storage's best-in-class credit ratings, sets the stage for attractive financial returns as the self-storage industry rebounds.
- Yielding High Dividends
Public Storage doesn't prioritize raising its dividend annually, but its dividend payments have grown tremendously over the past two decades – boosting an annualized growth rate of 10%. Its current dividend yield stands at 4.1%, significantly above its 10-year average. By investing in Public Storage, you can enjoy the rare benefit of both impressive capital gains and rewarding income.
- Valued at a Discounted Price
Despite Public Storage's potent mix of industry-leading operations, enticing growth prospects, and best-in-class financial performance, the REIT's valuation falls in line with its peers. With a 17 times cash from operations (CFO) ratio, Public Storage is approaching a historic low. This discounted valuation, combined with its 4.1% dividend yield, presents a compelling value proposition for investors seeking both income and capital appreciation.
Although numerous factors contribute to Public Storage's stock volatility, its fundamental strength, compelling value proposition, and industry-leading characteristics position it as an exceptional opportunity for long-term investors.
In light of Public Storage's strong financial performance and abundant growth opportunities, I believe now is an excellent time for individuals who are interested in finance and investing to consider purchasing shares of this REIT. The REIT's high dividend yield of 4.1% and promising growth potential, paired with its current discounted price, make it an attractive option for investors seeking both income and capital appreciation.
Moreover, the cyclical nature of the self-storage industry and the REIT's resilience during economic downturns can provide a secure investment option, given its unwavering financial strength and cash flow generation capabilities.
