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Iron Mountain IRM is well-poised to gain from a recurring revenue business model and expansion efforts in the data center segment. A healthy balance sheet is likely to support the company’s growth endeavors over the long term. However, competition from industry peers and elevated interest expenses are its concerns.
What’s Aiding IRM?
Iron Mountain enjoys a steady stream of recurring revenues from its core storage and records management businesses. The company derives the majority of its revenues from fixed periodic (usually earned on a monthly basis) storage rental fees charged to customers based on the volume of their records stored. Iron Mountain’s organic storage rental revenue increased 8.8% year over year in the fourth quarter of 2024. We estimate a year-over-year increase of 8.3% in storage rental revenues in 2025.
Iron Mountain is supplementing its storage segment’s performance with expansion in its faster-growing businesses, most notable being the data center segment. In February 2025, in a strategic partnership with Ooredoo Group, Iron Mountain has announced to take a minority equity stake in Ooredoo’s carrier-neutral data center company, MENA Digital Hub. This move, along with the past, will enable the company to capitalize on strong demand for connectivity, interconnection and colocation space and drive leasing activity.
In 2024, the company attained data center revenue growth of 25.3%. It leased more than 100 MW of data center capacity for the third consecutive year in 2024. Due to the company’s strong pipeline, management expects to lease 125 MW for 2025.
Iron Mountain had a total liquidity of approximately $3.3 billion as of Dec. 31, 2024, and a weighted average maturity of 4.9 years. With this, it has ample financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities. Iron Mountain ended the fourth quarter of 2024 with net lease-adjusted leverage of 5.0X, the lowest level since before the company’s REIT conversion in 2014. For 2025, the company expects to end the year at similar levels to year-end 2024.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Iron Mountain remains committed to that. In February 2025, concurrent with its fourth-quarter 2024 earnings release, it announced a 10.6% hike in its cash dividend to 78.5 cents per share from 71.5 cents paid out earlier. Given its healthy operating platform, our year-over-year adjusted funds from operations (FFO) growth projections of 8.1% for 2025 and solid financial position, the increased dividend is likely to be sustainable in the forthcoming period.