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Is National Storage Affiliates' (NSA) Dividend Hike Sustainable?

National Storage Affiliates Trust NSA announced its third hike in quarterly common dividend this year. The company will pay 45 cents per share in dividend for the fourth quarter of 2021 compared with the 41 cents paid earlier, denoting a 9.8% sequential increase. This new rate also marks a surge of 28.6% from the year-ago period.

The increased dividend will be paid on Dec 30, to shareholders on record as of Dec 15, 2021. The latest dividend rate marks an annualized amount of $1.80 per share versus the prior rate of $1.64. Based on the company’s share price of $61.90 on Nov 18, it results in a dividend yield of 2.9%.

Solid dividend payouts are the biggest enticements for REIT investors and National Storage Affiliates is committed to boosting shareholder wealth.

According to Tamara Fischer, president and chief executive officer, commented, "We are pleased to raise our dividend for the third time this year, representing an almost 30% increase from last year’s fourth-quarter rate. The powerful combination of internal and external growth facilitated by our differentiated PRO structure continues to deliver robust returns for shareholders."

The latest hike reflects National Storage Affiliates’ ability to generate decent cash-flow growth through its operating platform and a high-quality portfolio.

In the third quarter, NSA reported core funds from operations (FFO) of 57 cents per share, which surpassed the Zacks Consensus Estimate of 56 cents and increased 29.5% year over year. The results were supported by an increase in same-store total revenues.

The company has a decent FFO surprise history, having beaten the consensus mark in each of the trailing four quarters, with an average surprise of 6.38%. Its long-term expected growth rate is currently pegged at 12.7%.

With the current cash-flow growth rate of 51.73%, as against the industry’s average of a negative 1.95%, the increased dividend is likely to be sustainable.

National Storage Affiliates is likely to benefit from the favorable fundamentals of the self-storage asset category, which  is need-based and recession-resilient. This asset class has low capital-expenditure requirements and generates high operating margins. The self-storage industry also continues to benefit from favorable demographic changes.

However, migration, the downsizing trend, and an increase in the number of people renting homes have escalated the need of consumers to rent space at a storage facility to park their possessions. Further, demand for self-storage space has increased amid a flexible working environment and the improving housing market, while move-outs remain low amid the health crisis.

Shares of Zacks Rank #2 (Buy) NSA have gained 11.4% in the past three months compared with the industry’s rally of 1.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Image Source: Zacks Investment Research

Other Key Picks

Some other key picks from the REIT sector include Terreno Realty Corporation TRNO, CubeSmart CUBE and Rexford Industrial Realty REXR.

Terreno Realty holds a Zacks Rank of 2, at present. Its 2021 FFO per share is expected to increases 19.4% year over year.

The Zacks Consensus Estimate for TRNO’s 2021 FFO per share has been revised marginally upward in a month.

CubeSmart’s Zacks Consensus Estimate for the ongoing-year FFO per share has moved 1% north to $2.05 over the past month.

CubeSmart’s 2021 FFO per share estimate suggests an increase of 19.2% year over year. Currently, CubeSmart carries a Zacks Rank of 2.

Rexford Industrial holds a Zacks Rank of 2, at present. Its long-term growth rate is projected at 12.9%.

The Zacks Consensus Estimate for REXR’s 2021 FFO per share has been revised 4.5% upward in a month to $1.63.

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.


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