Extra Space Storage Repairing Dividend Damage of 2009

Steven Bobson, Europe & Americas Editor
September 12, 2012 /

Extra Space Storage ( EXR ) is still repairing the dividend damage suffered during the last recession.

The Utah-based real estate investment trust skipped the second- and third-quarter payouts in 2009 and reduced the subsequent payouts.

The quarterly dividend was 25 cents a share in Q1 of 2009. After skipping the next two quarters, the Q4 payout was 13 cents a share and 10 cents a share in Q1 of 2010.

Since then, the quarterly dividend has doubled to 20 cents a share. The annualized yield is 2.3%.

The stock appeared Friday in IBD’s Your Weekly Review, which basically involves the top 15 percentile of the market.

Extra Space is a REIT that derives its income from rent payments on storage units, a revenue fee of 6% on properties it manages for others, and tenant insurance.

The fee-based revenue for managing other facilities brings a benefit beyond revenue. Extra Space Storage sees the management business as an acquisition pipeline. Acquisitions are a key part of Extra Space Storage’s growth strategy. The company made 55 acquisitions in 2011.

As of June 30, Extra Space was managing 179 facilities for franchisees or third parties. The company owns 363 facilities and has a stake in 340 joint ventures. Together, that makes for 882 in 34 states.

Most facilities are in major cities. About 24% are in California.

Annual earnings last year grew 28% on revenue growth of 17%. The Street expects EPS to advance 24% this year on a 16% pop in revenue.

In the past three quarters, EPS leapt 30%, 31% and 34% on revenue gains of 27%, 22% and again 22%.

Rivals such asPublic Storage ( PSA ), Sovran Self Storage ( SSS ) and CubeSmart ( CUBE ) are showing slower growth on the top and bottom lines.

Drawbacks for Extra Space include a sluggish economy and tight credit. Extra Space has $1.3 billion in total debt, with 18% subject to variable interest rates.

Some market watchers say the self-storage business is “recession-proof” or “recession-resistant.” If so, someone forgot to tell the stock market.

In the past recession, the stock of Extra Space fell 76%, Public Storage 61%, Sovran 74% and Cube-Smart 94%.


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