Holding shares in companies most would regard as dull can be very profitable for shrewd investors. Two examples of companies unlikely to set pulses racing are Big Yellow (LSE:BYG) and Safestore (LSE:SAFE), the biggest self-storage players in the UK.
Unlike headline-grabbing tech stocks or small cap oil explorers, these companies stay out of the news and devote their energies to growing profits and rewarding their shareholders through wonderfully simple business models. They keep possessions safe and secure for a fee. That’s it. Stuff just sits there and, for as long as it does, their investors benefit. No excitement, no drama. Given our consumer-driven society’s tendency to accumulate more and more items over the years, this seems like a compelling investment opportunity to me.
Big Yellow released its annual report this morning and its contents are likely to be very encouraging for investors. The 89-store, £1.5bn cap reported revenue of £101.4m, a 20% increase on last year. Adjusted earnings per share increased 15%. The final dividend is 13% higher than last year at 12.8p per share, bringing the total dividend to a very satisfying 24.9p.
Commenting on another strong year of growth for the brand leader in self-storage, Executive Chairman Nicolas Vetch stated that the company’s priority remains “driving earnings through occupancy growth over the next few years”. The new goal for this will be 85% across the Big Yellow portfolio, an increase of 8.3% on today’s figure. He also reflected that the group would continue to focus on London, the South East and large regional cities where “barriers to entry are highest, and supply remains very constrained.”
Since May last year, Big Yellow’s share price has increased from 650p to today’s 866.5p. Using the adjusted earnings per share figure of 31.1p, it’s P/E ratio now stands at a steep 28, reflecting the market’s positive opinion of the company. Given that the good news appears to be priced-in, investors keen to deposit their wealth with the business may wish to wait for a better entry point in the future.
Stow your wealth
Of course, Big Yellow isn’t the only listed provider out there. Safestore, whose interim results are published next month, has 95 stores in the UK (and 137 when its operations in Europe are included). It remains to be seen whether these are as positive as those issued by Big Yellow today.
According to Stockopedia, the company is on a forecast P/E ratio of just over 19. As a rule of thumb, a figure around 15 would be considered decent value for most companies, which would imply that these shares are certainly not cheap. They are, however, cheaper than those offered by Big Yellow and a forecast dividend yield of just under 3% is adequate compensation. That said, if results are positive, this figure (and the company’s share price) are likely to rise further. So, if investing in a self-storage firm appeals, it may be worth giving Safestore serious consideration over the next few weeks.
While recycling or reselling items is beneficial to the environment and increasingly popular, the tendency for people to hoard items over the years makes self-storage a worthwhile investment in my opinion. The resilient nature of the service offered by both companies and their commitment to growing occupancy rates and dividends should make either a fairly reliable home for your wealth.
According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…
And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...
It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…
But you need to get in before the crowd catches onto this ‘sleeping giant’.
Paul Summers owns shares in Big Yellow Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.