If you Invested $10K in CubeSmart 5 Years Ago, Here's How Much You Would Be Making In Dividends Today

If you Invested $10K in CubeSmart 5 Years Ago, Here's How Much You Would Be Making In Dividends Today

One of the best things about investing in high-quality real estate investment trusts (REITs) is that the dividends paid over time will likely increase as the company’s business and earnings grow. And as those dividends grow, the yield on your original purchase price will increase. 

But how does an investor know which REITs are likely to increase dividends in the future? One of the best measures is to look at companies whose dividend has been growing substantially over the previous five years and select one of those rather than a company whose dividend has remained flat or only increased slightly over time.

One such company with a terrific dividend track record since 2017 is CubeSmart CUBE, a Malvern, Pennsylvania-based self-storage REIT with over 1,300 storage facilities in 39 states across the U.S.

CubeSmart’s 52-week price range is $36.82 to $57.34. The most recent closing price was $42.35. CubeSmart shares bolted higher this week after it was announced that it will be included in the S&P MidCap 400 Index, replacing NuVasive Inc., which moved to the S&P SmallCap 600 Index. Over the past five days, CubeSmart shares are up 8.8%.

If you invested $10,000 in CubeSmart in December 2017, the quarterly dividend was $0.30 per share or $1.20 annually, and with the stock trading near $29 at the time, the annual yield was about 4.1%.

Fast forward five years to the present, and CubeSmart’s dividend is $0.43 per share, an increase of 43.3%, or 8.6% per year. The annual dividend of $1.72 yields 4% for anyone picking up shares today, but the shares you would have purchased at $29 now yield 5.9% annually in addition to the appreciation gained over that time.

Over the past five years, CubeSmart has raised its quarterly dividend four times. The last dividend hike was in December 2021, from $0.34 to $0.43, a noteworthy increase of 26%.

Multiple dividend increases like this show that the business has been growing and that funds from operations (FFO) have been strong enough to support growing payouts to happy shareholders over time. CubeSmart’s recent third-quarter operating results were strong, improving both FFO and revenue from the third quarter of 2021 and also beating analysts’ estimates. 

With a history like that, CubeSmart seems like a company that is on track to continue improving its results and offer its shareholders additional dividend increases in the future.

Currently, its annual forward FFO is $2.51, and the annual dividend is $1.72, which puts the payout ratio at 68%. While a payout ratio of around 50% would be ideal, it certainly leaves plenty of room for future dividend increases and coverage.

Keep in mind that when you buy a high-quality REIT, even if the dividend yield isn’t huge at the time of purchase, it’s possible that over time the dividend may continue to grow and produce a much higher yield on your purchase price.

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Posted In: Alternative investmentsreal estate investingSelf-storage REITREITReal Estate