This is my favourite FTSE 250 stock that I own!

This Fool hopes to own this FTSE 250 stock for decades ahead. Here he explains why he bought the shares and why he plans to buy more.

| More on:
Investor looking at stock graph on a tablet with their finger hovering over the Buy button

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I love FTSE 250 stocks. Unlike the FTSE 100, many go under the radar as they’re less well known. Nevertheless, they still offer exciting growth opportunities for investors.

Of those I own, Safestore (LSE: SAFE) is my favourite. The business is the UK’s largest self-storage unit provider. In the last five years, it’s up 28.9%. In the last decade, it has risen 253.3%.

I’ve been slowly adding to my position of late. I want to own the stock for a very long time. Here’s why.

No plans to slow down

The main reason I’m bullish on Safestore is because of management’s ambitious plans. The company has a strong grip on the domestic market. It has over 130 sites in the UK alone. But it doesn’t plan on stopping there.

Now, it has its eyes firmly set on Europe. Last year it added 500,000 sq ft of lettable area across 13 sites to its portfolio. This included in countries such as Spain and the Netherlands. It also agreed a joint venture with private equity group Carlyle to enter what it calls “the under-penetrated” German market.

Looking forward, the business is also taking strides to grow its development pipeline by a further 1.5m sq ft across 30 projects. As a shareholder, it’s moves like this that I want to see.

A strong track record

Another box I like to tick when buying a stock is the opportunity to generate passive income. With the money I receive from dividend payments, I reinvest it back into buying more shares. In turn, I benefit from ‘dividend compounding’. This is a key method I’m using to build my long-term wealth.

Safestore shares yield 3.9%, above the FTSE 250 average of 3.4%. While dividends are never guaranteed, I’m confident in Safestore’s payout given the growth it has experienced in the last decade. During that time, it has increased by double digits every year.

Volatile valuations

While I’m bullish, I think the largest threat to the business at the moment is interest rates.

Firstly, higher rates translate to higher rents. This could see customers let go of their storage space. To add to that, they also impact property values. We saw this in 2023 when its profit before tax more than halved due to valuation changes.

The firm also has some debt on its balance sheet, which will be more difficult to pay off right now. I’ll be looking for any updates on this in future releases.

A long-term shareholder

Regardless, I think Safestore is one of the best stocks in my portfolio. I plan to be a shareholder for years to come.

Safestore is the leader in an industry with strong barriers to entry. Couple that with its expansion plans and a healthy yield, and I see it as a smart buy for my portfolio.

The stock looks cheap, trading on a price-to-earnings ratio of just 8.4. With any investable cash, I’m keen to keep adding to my position.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Charlie Keough has positions in Safestore Plc. The Motley Fool UK has recommended Safestore Plc. 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.

More on Investing Articles

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »

Investing Articles

The Aviva dividend yield’s already over 7%. Could it go higher?

Christopher Ruane explains why he thinks the Aviva dividend could be on course to grow this year and beyond. Might…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

2 shares I’d buy to try and double my money in 10 years

Stephen Wright thinks there are still opportunities to to buy UK shares that can double in value over the next…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

NIO stock has crashed! Here’s why I still wouldn’t touch it with a bargepole

I've been watching NIO stock falling heavily, and wondering when might be a good time to get in cheaply. Here's…

Read more »

Investing Articles

Why have Rolls-Royce shares fallen this week?

Rolls-Royce shares remain the best performing on the FTSE 100 over the past year, but there's been some pullback. Dr…

Read more »

Investing Articles

With a 4.3% yield, I consider this FTSE company an exceptional investment

Oliver Rodzianko say this FTSE company is focused on quality and long-term survival. As such, he thinks he'll hold it…

Read more »

Investing Articles

How I’d invest £10,000 in a Stocks & Shares ISA and aim for a £45,500 second income

Millions of us aren’t earning the second income we deserve. Here, Dr James Fox explains how he’d get his savings…

Read more »