Sovran Self Storage: "Storing Stuff"

06/06/2016 7:00 am EST

Focus: REITS

Jimmy Mengel

Editor, Outsider Club

Our latest featured income idea operates as a real estate investment trust that acquires, owns, and manages self-storage properties in the United States, explains income expert Jimmy Mengel in The Crow’s Nest.

Sovran Self Storage (SSS) operates under the trade name Uncle Bob’s Storage. The REIT essentially buys up buildings and real estate and turns them into storage facilities for Americans to dump all of their stuff.

It's a pretty easy business to understand. And we know Americans have plenty more stuff than they know what to do with.

First quarter 2016 adjusted funds from operations per fully diluted common share of $1.22, representing a 11.9% increase over the same period last year.

Sovran acquired 25 self-storage facilities at a cost of approximately $332 million and grew same store average occupancy for the quarter by 90 basis points to 90.5% compared to the same period in 2015.

Revenues for the 428 stabilized stores wholly owned by the Company since January 1st, 2015 increased 6.7% from those of the first quarter of 2015.

I like this trend; much of this is due to increased rental rates and reduced operating costs.

This is a long-term dividend play; indeed, the board recently approved an increase of 11.8% in the quarterly dividend to $0.95 per share of common stock.

We're investing in Sovran for its dividend reinvestment program. Under its DRIP, the company will issue shares or fractions of a share equivalent to the quarterly dividend payment with a 2% discount.

I have a one-year price target of $120. We're buying Sovran as a DRIP under $116, and adding to the position on any dips.

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