Delighting its shareholders, Life Storage, Inc. rewarded its investors with an 8% sequential hike in the quarterly dividend on the company’s common stock, increasing it to $1.08 from the $1.00 paid out earlier. It also marks a 46% increase from the second-quarter 2021 dividend. The raised dividend is scheduled to be paid out on Jul 26 to shareholders of record as of Jul 15, 2022.

Based on the new rate, the annualized dividend rate comes to $4.32 per share, up from the prior annualized rate of $4.00. This indicates an annualized yield of roughly 3.78% considering Life Storage’s closing price of $114.17 on Jul 5.

Can Life Storage Maintain Its Payout?

Supported by multiple revenue drivers, a favorable payout ratio and a solid balance sheet, Life Storage is well-positioned to continue the cash flow and dividend growth.

This REIT recorded robust adjusted funds from operations (FFO) per share growth during the 2010-2021 period, with adjusted FFO per share rising at a CAGR of 9.9%. Moreover, LSI witnessed compound average annual dividend growth of 9.7% during the 2010-2022 period (considering the first-quarter 2022 annualized figure). Its quarterly dividend increase during last five years was 58%.

Over the past three to five years, Life Storage recorded FFO per share growth of 7.52% compared with the industry’s average of 0.84%. Also, the FFO per share is expected to be up 21.98% in 2022 compared with the industry’s average of 8.83%.

Life Storage’s current cash flow growth is projected at 42.37% compared with the 9.58% growth projected for the industry. Moreover, this REIT’s trailing 12-month return on equity (“ROE”) highlights its growth potential. The company’s ROE of 8.71% compares favorably with the industry’s 3.94%, reflecting that LSI is more efficient in using shareholders’ funds than its peers.

Life Storage operates more than 1,100 storage facilities in 36 states. The company serves both residential and commercial storage customers, with storage units rented by month. It is poised to benefit from favorable industry fundamentals and a diversified portfolio, with an increasing focus on primary markets.

The self-storage asset category is need-based and recession-resilient in nature. This asset class has low capital-expenditure requirements and generates high operating margins. Additionally, the self-storage industry continues to benefit from favorable demographic changes. Also, with the industry being fragmented, there are opportunities to build scale through acquisitions.

Bottom Line

Such disbursements demonstrate Life Storage’s operational strength and commitment to rewarding its shareholders handsomely. The hike reflects LSI’s ability to generate solid cash flow growth through its operating platform and high-quality portfolio. As investors are always on the lookout for companies with a track record of consistent and incremental dividend payouts to bet their money on, solid dividend payouts are arguably the biggest enticements for them.

Shares of this Zacks Rank #3 (Hold) company have declined 2.5% over the past month, narrower than the industry's fall of 6.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Image Source: Zacks Investment Research

Key Picks

Some key picks from the REIT sector include Prologis (PLD Quick QuotePLD - Free Report) and Rexford Industrial Realty, Inc. (REXR Quick QuoteREXR - Free Report) .

Prologis carries a Zacks Rank of 2 (Buy) at present. Prologis’ long-term growth rate is projected at 9.8%. The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised marginally upward in the past week.

Rexford Industrial Realty holds a Zacks Rank of 2 at present. Rexford Industrial Realty’s 2022 revenues are expected to increase 34% year over year. The Zacks Consensus Estimate for REXR’s 2022 FFO per share has been revised more than 1% upward in the past week.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.