Iron Mountain (IRM) is a great dividend stock that is currently yielding over 7% — which is almost impossible to find in this environment, explains Jimmy Mengel, growth and income expert and editor of The Crow's Nest.
Iron Mountain is a real estate investment trust — or a REIT — and functions as both an industrial REIT and a data center REIT. It operates in records management, data management, digital solutions, and secure shredding.
The company has more than 225,000 customers from over 50 different industries from health care, to financial, insurance, life sciences, and energy. It counts over 95% of Fortune 1000 companies as clients.
What first drew me to the company was the moat it had in that storage business. It provides safe protection from everything from fine art and historical artifacts to master recordings of music and hard copies of Hollywood films.
Now, during the third quarter, Iron Mountain’s revenue did slip by 2.4% year over year to $1.0 billion. This is mostly due to the pandemic. Services revenue slid 12.5% year over year to $340.0 million, but the company’s storage rental revenue increased 3.4% year over year to $1.1 billion. Storage rental is the bulk of IRM’s business, to the tune of 65%.
In December, it raised some capital by selling 13 industrial facilities to Blackstone Real Estate Income Trust Inc. for $358.0 million. This will allow it some money to grow its data center business.
The company is looking to expand, but I’m more interested in Iron Mountain for the juicy dividend. Its 7% dividend is highly valuable and represents a payout ratio of 85%.
This leaves it with plenty of space for keeping investors happy with a strong dividend. In the fourth quarter, Iron Mountain’s board of directors maintained its record payout by declaring a quarterly cash dividend of $0.6185 per share.
Iron Mountain has a great history of increasing its quarterly dividend. Since the first quarter of 2010, the company’s quarterly dividend has increased by 889%, from $0.0625 to $0.61.
The only time IRM hasn’t raised the dividend was in 2020 — for obvious reasons. While many large companies were slashing — or even eliminating — their dividend, Iron Mountain hung in there.
I first recommended the stock last year during the doldrums of March — at exactly the right time. We’re up a healthy 46% since then. I suspect that once the COVID curtain begins to lift, Iron Mountain will be a solid growth stock. It’s a great time to start a position.
