Iron Mountain Inc (NYSE:IRM) Stock: Retire on This High-Yield Stock
The Best 5.8% Yield for Retirement Investors
Most people have never heard of Iron Mountain Inc (NYSE:IRM), but it offers three things that are of utmost importance to retirement investors: a high current yield, solid dividend safety, and consistent dividend growth. Let me explain further.
Headquartered in Boston, Massachusetts, Iron Mountain is a provider of storage and information management services. The company was founded in 1951 and has grown to have a real estate portfolio of 87-million square feet across 1,433 facilities in 53 countries. Through its massive real estate network, the company provides records management, data management, document management, data centers, art storage and logistics, and secure shredding services. (Source: “Durable Business Drives Cash Flow and Dividend Growth,” Iron Mountain Inc, last accessed November 27, 2017.)
If you have been following the markets, you would know that the current environment isn’t the best for retirement investors. Interest rates are still low and the average S&P 500 company is yielding a measly 1.85%.
That’s where Iron Mountain can be of great help. With a quarterly dividend rate of $0.5875 per share, the company offers an annual yield of 5.8%.
Iron Mountain also has a solid business to back its generous payout. The company serves more than 230,000 customers around the world, including 95% of Fortune 1,000 companies. Adding in strong customer retention from its real estate portfolio, Iron Mountain generates a recurring business.
Best of all, Iron Mountain Inc is structured as a real estate investment trust (REIT). This means the company is required by law to distribute at least 90% of its profits to shareholders every year in the form of dividends. And if business keeps growing, it would have to pay increasing dividends too.
In the first nine months of 2017, the company earned $2.85 billion in revenue, representing a 10.7% increase on a constant currency basis. Adjusted funds from operations (AFFO), a critical measure of a REIT’s performance, increased 19.8% year-over-year to $598.0 million during this period. (Source: “Iron Mountain Reports Third Quarter 2017 Results,” Iron Mountain Inc, October 24, 2017.)
Thanks to solid financial performance, the company raised its quarterly dividend rate by 6.8% to $0.5875 per share in October 2017. Over the last three years, Iron Mountain’s per-share payout has grown by 23.7%. (Source: “Historical Dividends,” Iron Mountain Inc, last accessed November 27, 2017.)
Despite all the dividend increases, the company has maintained its dividend safety. For 2017, management expects the AFFO payout ratio to be approximately 79%, meaning the company won’t be paying out all its cash flow.
Iron Mountain has also been repurchasing its shares. Unlike paying dividends, the company doesn’t mail out a check to shareholders every time it buys back its shares. But by reducing the number of shares outstanding, each existing shareholder gets a slightly larger ownership of the company.
Thanks to solid share price performance, dividend growth, and stock buybacks, Iron Mountain delivered 28% of total shareholder return in 2016. Year-to-date, it returned another 31%.
Bottom Line on This High-Yield Stock
Last but certainly not least, the company could help investors preserve purchasing power in retirement. Iron Mountain has target dividend growth rates of five percent for 2018, four percent for 2019, and four percent for 2020. If the company achieves these targets, shareholders would see their income stream grow must faster than the expected inflation rate, which is about 2.1% annually for the three-year period.
And that’s why this company deserves the attention of retirement investors.