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Public Storage PSA is one of the most recognized names in the self-storage industry with a high brand value. Its efforts to leverage technology, accretive buyouts and a strong balance sheet are encouraging. However, softer industry-wide demand and high interest espenses are concerns.
Last month, PSA reported its fourth-quarter 2024 core funds from operations (FFO) per share of $4.21, missing the Zacks Consensus Estimate of $4.23. The figure increased marginally year over year.
Results reflected lower same-store revenues year over year, owing to a decline in occupancy. However, a decent increase in realized annual rent per occupied square foot positively impacted the performance to some extent.
What’s Aiding PSA?
Public Storage is one of the top owners and operators of storage facilities in the United States. The ‘Public Storage’ brand is a much-recognized and established name in the self-storage industry, with a presence in all major metropolitan markets of the country. The self-storage asset category is need-based, with low capital expenditure and high operating margins. Amid these tailwinds, PSA is well-poised for future revenue growth. For 2025 and 2026, we estimate total revenues to grow 2% and 3.2%, respectively, year over year.
Public Storage is also leveraging technology for revenue optimization and cost efficiencies and, as such, has invested in technologies over the past few years. Such efforts are likely to bolster the company’s competitive edge.
Public Storage has been capitalizing on growth opportunities. From the beginning of 2022 through Dec. 31, 2024, Public Storage acquired a total of 260 facilities with 18.5 million net rentable square feet (RSF) for $3.7 billion. During 2024, these facilities contributed a net operating income (NOI) of $159.7 million. As of Dec. 31, 2024, Public Storage had 26 self-storage facilities in development and expansion, which are expected to add 4 million net RSF at an estimated cost of $741.6 million. With solid access to capital, the company is well-poised to take advantage of any potential opportunity.
PSA concluded the fourth quarter of 2024 with net debt and preferred equity to EBITDA of 3.9X and an EBITDA to fixed charges of 6.9 times. It also enjoys an “A” credit rating from Standard & Poor’s and an “A2” from Moody’s. The sturdy credit profile and ratings enable the company to access public and private capital markets to raise capital at favorable rates.
Furthermore, robust dividend payouts are arguably the biggest enticement for investment in REIT stocks. While the company has increased its dividend two times in the past five years, its payout has grown 12.42% over the same period. Looking at the company’s operating environment and financial position compared to that of the industry’s average, its current dividend is expected to be sustainable in the upcoming period.