4 REITs To Gain Exposure To Growing Self-Storage Real Estate Market

4 REITs To Gain Exposure To Growing Self-Storage Real Estate Market

George Carlin’s classic bit about “stuff” and where to put “stuff” and the hilarity of finding places for “stuff” is what self-storage is all about.

The dilemma of where to put your stuff is addressed by this market and one of the best ways to take advantage as an investor is with self-storage real estate investment trusts (REITs).

Filling up storage space is not just for homeowners or renters with excess stuff—businesses are looking for the same places too.

A few REITs focused on the entire range of self-storage needs have emerged over the past few years and have done well–especially when considered as alternatives to former stock market favorites, such as tech and social media stocks.

Answering that “where do I put my stuff?” question has made these self-storage real estate investments attractive to many investors from the March 2020 pandemic scare until now:

Related: VanWest Launches Its Third Self-Storage Fund

Public Storage

Public Storage PSA is growing its funds from operations (the REIT version of earnings) by 56.90% this year. The past 5-year growth rate is a much tamer 7.7%. Wall Street expects the FFO increases for this self-storage real estate investment trust to continue, although perhaps not at the current 12-month pace.

The REIT’s dividend yield is 2.42%. The price-to-earnings ratio is higher than the market as a whole, up there at 32, but this sector has outperformed until recent weeks. It’s not been that unusual for operations of these kinds to sport higher price-to-earnings ratios.

Public Storage stock has dropped from a peak of $420 per share in April of this year down to its recent price of $330 per share. 

Extra Space Storage

Extra Space Storage Inc. (NYSE: EXR) is another widely followed company in this sector with funds from operations up by 66.8% this year. The rate of growth over the past 5 years is 16.30%. As with Public Storage, Wall Street analysts do not expect the recent torrid pace to continue but remain positive about the stock.

The price-to-earnings ratio of 29 is about in line with the sector but higher than that of the S&P 500. The average daily volume is 743,000 shares, relatively light for a New York Stock Exchange-traded security.

Extra Space Storage currently has a dividend yield of 3.33%.

Related: This REIT You've Probably Never Heard of Has Paid a Dividend Above 8% For The Last 5 Years

CubeSmart

This self-storage REIT currently has a 3.89% dividend yield. CubeSmart’s CUBE FFO is up by 28.30% this year and up by 19.60% over the past 5 years. The price-to-earnings ratio of 42 is higher than the group of stocks in this sector. 

The average daily volume is 1.62 million shares, relatively liquid and making it possible for larger institutions to buy (and sell).

Life Storage 

Life Storage LSI trades on the NYSE with a price-to-earnings ratio of 34. This year’s funds from operations increased by 48.90% with a positive FFO growth rate of 19.4% for the past 5 years.

The company’s dividend has a yield of 3.41%. Life Storage is another REIT that is relatively lightly traded with an average daily volume of just 550,000.

This one peaked in December of last year at $154 per share and now goes for $117 per share, which is quite a drop in a short period.

Bottom Line

It’s important to realize that REITs, such as these, depend greatly on broader economic concerns, such as interest rates, levels of employment and the effects of inflation. Because of these factors, they can be volatile in price during times of uncertainty. On the other hand, investors may be able to benefit from the diversity REITs can offer as compared to tech or social media stock sectors.

In the meantime, consider how valuable self-storage can be to those looking for space to keep their stuff, as comedian George Carlin described it not too long ago.

Image by Farid Sani on Shutterstock

Posted In: Alternative investmentsInformation Technologyreal estate investingself-storageSemiconductorsREITReal Estate