The self-storage game is becoming increasingly big business all over the Western world. Largely speaking, we seem to have more possessions than we know what to do with, reflecting our increasingly consumerist society and our reluctance to throw out things we no longer need.
Here in the UK a variety of social changes have driven demand for the storage spaces offered up by the likes of Safestore Holdings (LSE: SAFE) still further, a firm currently trading at record highs above 720p per share. A growing residential rentals market, rising divorce rates, and growing space requirements for business purposes are just a few of those catalysts which mean that the self-storage sector is now worth well over half a billion pounds.
FTSE 250 company Safestore is one of the country’s largest operators and remains hell-bent on rapid expansion to latch onto booming consumer demand through a mix of new site openings and acquisitions. The business has already opened a number of new facilities at London Mitcham, Paddington Marble Arch and Paris Poissy in recent months alone – sites which “are performing in line with or ahead of their business plans,” incidentally – and it has plans to open several more in London, Paris, Birmingham, and Peterborough in the remainder of 2019 and next year.
What’s more, the Hertfordshire company remains busy on the M&A front to keep growing its store portfolio, too. Back in August it joined with Carlyle to enter the Dutch market by acquiring M3 Self Storage and the six locations it operates in Amsterdam and Haarlem.
And why wouldn’t Safestore be encouraged to keep splashing the cash to expand its estate given the pace at which space-strapped citizens are flocking through its doors? Last time out in mid-September it advised that like-for-like revenues in the nine months to July were up 5.4% (at constant currencies) at £109.8m, while like-for-like closing occupancy of 78.6% was up 2.1 percentage points from the same point in 2018.
It’d take a braver man than me to predict anything other than another perky set of trading numbers when Safestore provides a fourth-quarter update on Thursday, 14 November.
Profit + dividend growth
Now City analysts expect Safestore to report that earnings swelled 13% in the financial year to October 2019, and that it’ll follow this with a further 7% bottom-line advance in the current period.
With these bold predictions come broker expectations that annual dividends – which rose 17% year on year in fiscal 2018 – will keep ascending at a healthy rate as well. That 16.25p per share is predicted to rise to 17.2p for the period just passed and again to 18.4p for the present period, meaning investors can latch onto an inflation-beating yield of 2.5%.
Now share pickers can find shares with bigger yields, sure, not to mention lower price-to-earnings ratios, than Safestore’s current reading of 23.9 times. But for those seeking a mix of strong profits and dividend growth through the 2020s (and possibly beyond) I still consider the self-storage giant to be a great pick for their ISAs.
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Royston Wild 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.