Self-Storage Firm CubeSmart Seeing Strong Demand


Real estate investment trusts or REITS make for great income plays, as they have to pay out the bulk of their net income to trust holders.

Wayne, Va.-basedCubeSmart ( CUBE ) is one of several publicly traded self-storage REITs. The company, which runs more than 500 self-storage facilities across the U.S, is seeing strong demand.

People putting away their excess stuff doesn't seem exciting, but it is big business. According to the Self Storage Association, a trade group, the industry in the U.S. generated $22 billion in sales last year. Self storage is one of the fastest growing segments in commercial real estate.

In August, CubeSmart reported Q2 funds from operations (FFO) of 22 cents per share, up 29% from year ago. FFO is a metric of operating performance for REITS. Revenue rose 22% to $82.3 million, the seventh straight quarter of double-digit growth.

The company noted strength in all geographic markets. Same-store occupancy for the quarter was 90% -- a record high. During the second quarter, the company closed on nine properties in five states.

Analysts polled by Thomson Reuters see FFO rising 22% to 89 cents a share this year, up from 14% growth in 2012. For 2014, FFO is expected at 98 cents a share, up 10%.

CubeSmart currently pays a quarterly dividend of 11 cents a share, which is up sharply from just 2.5 cents a share in 2010. On an annual basis, CubeSmart pays 44 cents a share. This works out to yield of about 2.4%. It has one of the lowest yields among a hodgepodge of firms in the Finance-Property REIT group. The group houses shopping center, apartment, office and industrial property REITS.

Other self-storage REITS such asPublic Storage ( PSA ) andExtra Storage Space ( EXR ) are also in the group.

CubeSmart also offers a cumulative redeemable preferred stock that currently pays a much larger yield of about 7.5%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas

Referenced Stocks: CUBE , EXR , PSA

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