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A&E's popular "Storage Wars" reality TV-show has brought a lot of attention to the self-storage industry lately. But it has been two straight years of strong returns that has caught the attention of investors.

CubeSmart (CUBE - Snapshot Report) is a self-storage real estate investment trust (REIT) that has been delivering better-than-expected results lately.

The company has met or beat the Zacks Consensus Estimate in each of the last 4 quarters, and has seen a steady increase in consensus estimates over the last several months. It is a Zacks #2 Rank (Buy) stock.

The company also pays a dividend that yields a solid 3.0%, and valuation is reasonable with shares trading at just 14.8x forward earnings.

Self-Storage REIT

CubeSmart is real estate investment trust (REIT) focused on self-storage facilities. It owns or manages 473 facilities across the U.S. and operates the CubeSmart Network, which consists of approximately 877 additional self-storage facilities.

Self-storage REITs might be among the least exciting in the REIT space, but they have been some of the best performers over the last two years.

The industry sees steady demand from people moving, and from people getting married and divorced. And the collapse in the residential real estate market has forced many families to downsize, further boosting demand for storage facilities. These factors have led to an increase in both occupancy and rental rates across the industry, and CubeSmart is no exception.

Strong Third Quarter Results

The company reported third quarter funds from operation (FFO) of 18 cents, beating the Zacks Consensus Estimate by a penny. It was a stellar 38% increase over the same quarter in 2010.

Total revenue rose 12% to $60.4 million, ahead of the Zacks Consensus Estimate of $60.0 million. This was driven by a 4.0% increase in same-store sales, as same-store occupancy rose from 77.7% to 80.8%.

Total operating income jumped 51% year-over-year. Same-store net operating income was up 8% as the company leveraged its fixed operating expenses.

Outlook

Following strong Q3 results, analysts raised their estimates for both 2011 and 2012, sending the stock to a Zacks #2 Rank (Buy).

Analysts expect the strong FFO growth to continue over the next few years. The Zacks Consensus Estimate for 2011 is $0.63, representing 23% growth over 2010. The 2012 consensus estimate is currently $0.71, corresponding with 14% growth.

Dividend

CubeSmart also recently announced a 14% increase in its quarterly dividend to $0.08. The equates to an attractive yield of 3.0%.

The company slashed its dividend twice during the Great Recession but has raised it twice since then. It is still well below the pre-recession level of 29 cents per share, however.

Valuation

The valuation picture looks reasonable for CUBE. Shares trade at 14.8x 12-month forward earnings, a slight premium to the industry median of 13.0x, but in-line with its historical median.

And its price to book ratio of 1.7 is in-line with its peers.

The Bottom Line

With favorable industry trends, rising estimates, a 3.0% yield and reasonable valuation, CubeSmart offers investors attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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