Receive a High Dividend Yield of 5.4%
One income source that has rewarded many income investors with market-beating returns is dividend growth stocks. Simply put, the companies that such stocks would be associated with are growing businesses that are growing their top-line revenue and paying a gradually higher dividend. This not only means money in investors’ pockets, but also returns that match, if not beat, the inflation rate.
This type of stock requires patience, buying and then holding onto the shares for some time. There is no need to try to time the market; rather, timing in the market is what matters.
One dividend growth stock worth considering is Life Storage Inc (NYSE:LSI). Life Storage is a real estate investment trust that acquires, owns and manages self-storage locations. The company has an ownership of more than 625 self-storage properties in 29 states across the U.S., including California, Florida, Nevada, and Arizona.
Here’s how LSI stock could benefit your bottom line via its growing payout.
Growing Payout History
Back in 2013, the dividend per share amounted to $0.48 per quarter. But, since then, the payout has more than doubled to $1.00 per share. This means that the dividend has an annual growth rate of 20%, which easily passes the average inflation rate of three percent.
Keep in mind that the revenue has supported a higher payout, going from $236.9 million per year in 2012 to $455.5 million per year in 2016. That is a 92% increase in just four years, and the dividend growth trend is highly likely to continue. (Source: “Life Storage Inc.,” MarketWatch, last accessed August 27, 2017.)
Future Dividend Growth
Part of Life Storage’s business is managing properties owned by third-party companies; the property itself is owned by another company, with Life Storage handling the property management. As of this writing, 37 properties are managed in this fashion, and the total earned from this service in 2017 is expected to be higher than in 2016. There are also many prospective clients in the pipeline, with whom new contracts are expected to be signed in the coming months. (Source: “Life Storage, Inc. Reports Second Quarter 2017 Results; Announces $200 Million Share Repurchase Program; Adjusts 2017 Guidance,” Life Storage Inc, August 2, 2017.)
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Another potential reason for more dividend growth is the 12 additional self-storage facilities that the company acquired between 2014 and 2017. These buildings have not yet benefited earnings, with current operating costs being higher than the revenue they generate.
Revenue, however, is expected to take the lead soon, following the leases with their current tenants being renegotiated at a higher rate in the coming months. What’s more, there will be less capital deployed into upgrading these properties.
Further, acquisitions expected to be completed in 2017 will return yields that are greater than eight percent. This will add to a high rate of return on invested capital, and to generated cash flow. (Source: Ibid.)
All three of the above factors will show in quarterly earnings reports and, more importantly, in an LSI stockholder’s income.
Final Thoughts About LSI Stock
Life Storage has a very unique business model that is very difficult to duplicate, and which limits the amount of competitive risk. These factors, plus the growing cash flow, make for the kind of investment that potential shareholders are looking for.
LSI stock is currently offering a dividend yield of 5.4%, which is more than double the average yield on the S&P 500 Index.