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.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
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.