Up over 100% in price in 10 years! Big Yellow also offers passive income from dividends

Oliver loves the look of Big Yellow to generate a healthy passive income from its generous dividends. He thinks storage real estate is a clever investment for his portfolio.

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When looking for reliable passive income, one of the first places I look is real estate investment trusts (REITs). What I love about these is that they give me a hands-off way to own a portion of rental properties. I’m not a fan of all the hassle that comes with managing a flat, house, or building myself.

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One of my favourite sectors of the industry is storage. It’s known to be reliably less prone to recessionary pressures, and one company in particular has caught my eye recently.

UK’s storage leader

Big Yellow Group (LSE:BYG) has lots going for it in my opinion. First of all, consider that its share price has risen over 100% in 10 years. What’s more, it has managed to pull this off with reliably low volatility. That’s rare for companies that pay good dividends. Often, high dividend yields come at the expense of share price growth. Not with this company. Thankfully, I might be able to get the best of both worlds over the long term.

Now I’ve shown the price is on the rise, what about the dividends? Well, Big Yellow has a generous yield of over 4%. While that’s not the highest in the real estate industry, as yields in the sector typically hover around 7%, I think it’s still excellent considering the share price growth I outlined above.

In fact, my preference is that I’d rather have a growing asset value and good dividends than a stagnant asset value with excellent dividends. If a share price isn’t growing, it might be on its way down soon instead.

Is the company good, though?

Assessing price and dividends is all well and good. But the real value of a business comes from its operations. I’ve studied Big Yellow Group for a while now, and I find it very impressive. The firm has 109 locations around the UK, and it’s continuously expanding. I reckon many readers have seen or are customers of the company already. I find myself thinking, with the company’s 4.8-star customer reviews on Trustpilot, maybe the shares are worth the same. After all, it’s customer satisfaction that will drive up the investment price over the long term.

Real estate risks

While it’s clear I love this firm, investing in real estate comes with some risks. For example, all of Big Yellow’s property is in the UK. That means that if there were a housing market crash where the price of properties in the country significantly fell, Big Yellow would be highly vulnerable to losses in asset value. This would negatively impact its balance sheet and likely also affect its income from rents due to changes in rental price expectations from customers.

That’s why I think I’ll hold the firm in my portfolio as part of a well diversified investment strategy. I don’t want all my assets in real estate, nor all in UK revenue streams. But a portion of my money invested in British storage property seems wise and prudent.

Right now, I’m almost certain I’ll buy a stake in this company soon.

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.

Oliver Rodzianko has no position in any of the shares 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.

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