Operating margins of 70%? Breakeven at close to 50% occupancy levels? This may sound like a dream real estate business. If you think so, then have a look at self-storage REITs. Investors looking for the top real estate stocks to buy now may be looking at homebuilders, data-center REITs, warehousing businesses, etc. However, one of the most stable sectors even during the pandemic has been self-storage.
Self-Storage REITs – One Of The Top Real Estate Stocks To Buy Now
Self-storage REITs like Public Storage, Extra Space Storage, and CubeSmart have grown significantly during recent months. The sector is unique in some ways to other REITs. The CapEx requirements are not very high. There is a long runway for growth as self-storage units can be set up in all major cities and towns of the US. The cost structure is also such that a 50%+ occupancy can lead to a breakeven scenario. Most importantly, the NOI margins can be as high as 70%, which is not the case in any other REIT segment.
The demand for self-storage units is driven by change. In the world that we live in, change seems to be the only constant. Changes in someone’s job situation, a marriage, or a death in the family are examples of events that drive the demand for self-storage units.
What do the dividend yields look like?
Public Storage trades at a 3.47% dividend yield as of 29th October 2020, when the stock closed at $230.86. Its yield has risen from around 2.6% in 2016 to 3.47% currently. During the last 2 years, the yield has hovered around the 3.4% mark, sometimes going as high as 4.4%.
Extra Space Storage is trading at a 3.09% dividend yield as of 29th October 2020, when the stock closed at $116.32. Its yield has risen from a low of 2.6% in the first half of 2016 to the current levels. In early 2020, yields went as high as 4.4%. The trend is similar to the one observed in Public Storage.
