The company describes itself as “the UK’s brand leader” in self-storage. Indeed, Big Yellow operates from 100 stores and owns 13 self-storage development sites, six of which have planning consent.
The firm kept trading through the lockdown because the government classified the business as falling within an essential sector. And the figures for the year to 31 March show modest single-digit-percentage growth in revenue, cash flow, adjusted earnings and the shareholder dividend.
Robust record from a FTSE dividend growth stock
The attraction of this stock, for me, is the firm’s multi-year record of incremental annual rises in cash flow and dividends. The business tends to have ‘sticky’ revenues. It seems that in today’s world, many people and organisations tend to store stuff for long periods. Indeed, the company rarely suffers from a lack of demand for its services. And current like-for-like occupancy is running around 82%.
Expansion continues at pace. A placing in April raised just under £80m net of expenses. And the firm plans to spend the money to grow its development pipeline. Chairman Nicholas Vetch said in the report, Big Yellow will continue with its strategy of building new stores in London and its commuter towns.
Vetch reckons the Brexit process and the run-up to the general election led to softer demand for the business for “much of the year.” But that all changed with the “decisive” outcome of the election. Indeed, visits and enquiries rose around 12% in January and February compared to the prior year. Growth in occupancy also rose year-on-year in January and February.
The lockdown reversed the gains in March, but I reckon those previous trends indicate the possibilities as we emerge from the Covid-19 crisis over the coming weeks. Vetch explained that demand from businesses has been “relatively” resilient over the lockdown period. But demand from short-stay, domestic, event-driven customers dropped. In the “immediate” aftermath of the lockdown, customer move-ins and move-outs fell by around 50%.
Bouncing back fast
Happily, with visibility emerging regarding the country’s exit from the lockdown, Big Yellow is seeing an increase in move-ins and move-outs. For the first week of June, for example, prospect numbers rose by 20% on the equivalent period last year. And net rent per square foot has risen by 1.4% since 1 April 2020.
Vetch revealed in the report that more than 80% of customers pay by direct debit. I reckon it’s easy for people to forget about those relatively small monthly outgoings, which could add to the resilience of Big Yellow’s revenue and cash flow!
The directors haven’t furloughed any employees or asked for any financial help from the government. Meanwhile, the full-year dividend is on, and shareholders will receive an increase of 1.8% compared to the previous year’s payment.
With the share price at 1,038p, the forward-looking yield for the trading year to March 2021 is just over 3.3%, which I see as attractive.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.