Public Storage (NYSE:PSA) is the undisputed leader in the self-storage industry, and the stock had been quite a market laggard until recently. However, tides have turned, and Public Storage is now up 18% in 2019. Is it still a good buy, or has it become too expensive?
Public Storage has previously said that it can break even with about 30% occupancy in its properties, and its occupancy rate is currently 92.5%. That's a big margin of safety.
Public Storage also has a rock-solid balance sheet. Most real estate investment trusts use a considerable level of debt to fund their operations -- debt in the 30%-40% of total capitalization range is common. Well, Public Storage has just about 3.2% (not a typo) of its capitalization in the form of debt.
Over the years, Public Storage has built up a great dividend track record. Since 2002, the company's dividend has grown at a 9.8% annualized rate, and the current 3.4% yield is well covered by Public Storage's earnings.
Some of the risks include if long-term interest rates are rising, an overabundance of self-storage facilities and the sector being cyclical because of their month to month leases. But overall, it appears the pros far vastly outweigh the cons. However, the chart suggests the upside opportunity is limited due to the weekly supply at $254.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.