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Life Storage (LSI) Announces 7% Dividend Hike: Time to Buy?

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Life Storage LSI recently announced a 7% hike in its quarterly common stock dividend. The company will now pay $1.07 per share compared with the $1 paid earlier.

The increased dividend will be paid on Jan 27, to shareholders on record as of Jan 14, 2020. The latest dividend rate marks an annualized amount of $4.28 per share versus the prior rate of $4.00 per share. Based on the company’s share price of $106.26 on Jan 2, it results in a dividend yield of around 4.03%.

Solid dividend payouts are the biggest enticement for REIT investors and Life Storage remains committed to boosting shareholder wealth. In fact, prior to this latest hike, the company’s dividend has witnessed a CAGR of 9.3% since 2010.

Backed by multiple revenue drivers, a favourable payout ratio and a solid balance sheet, Life Storage seems well poised to continue cash flow and dividend growth.

Located in Buffalo, New York, this self-storage REIT operates more than 850 storage facilities in 29 states in the United States, including presence in 18 of the top 25 fastest growing markets in the United States, as well as in Ontario, Canada, serving both residential and commercial storage customers.

The company has been able to achieve diversity, both demographics and geographic, through the West Coast expansion in 2016, and asset-recycling program in 2018 and 2019. For the past few years, the company has been focused on building scale in both primary and secondary markets, and targeted margin expansion and revenue growth by leveraging on its scale. Such efforts have helped the company’s funds from operations (FFO) per share witness a CAGR of 9.6% since 2010.

Further, Life Storage has a solid, unsecured balance sheet with no debt maturities until 2021. In fact, it is investment grade rated with Baa2 from Moody’s and BBB from S&P. The weighted average debt tenor is 7.3 years and the company has nearly 100% unencumbered asset base. Moreover, with a current cash-flow growth rate of 37.08%, ahead of the industry’s average of 13.22%, the increased dividend is likely to be sustainable.

Life Storage currently carries a Zacks Rank #2 (Buy). Over the past six months, shares of the company have outperformed the industry. While the stock has appreciated 7.4%, the industry has gained 2.4% during this period.

Other Key Picks

EastGroup Properties, Inc. EGP currently carries a Zacks Rank of 2. The company’s funds from operations (FFO) per share estimates for 2019 have been revised marginally upward to $4.96 in two months’ time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Duke Realty's (DRE - Free Report) Zacks Consensus Estimate for 2019 FFO per share has moved marginally north to $1.44 in the past two months. It carries a Zacks Rank of 2, at present.
PS Business Parks, Inc. PSB Zacks Consensus Estimate for 2019 FFO per share has remained unchanged at $6.74 over the past month. Currently, it carries a Zacks Rank of 2.

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