Iron Mountain: A Unique REIT
11/29/2016 8:00 am EST
During the 1930s and 1940s, Herman grew mushrooms in an abandoned iron-ore mine located in Iron Mountain near Germantown, NY, notes Ian Wyatt, dividend expert and editor of High Yield Wealth.
The mine produced the optimal mushroom environment: the right moisture, the right temperature, the right illumination.
It occurred to Knaust that the mine offered the the optimal environment for storing documents. After all, the Cold War era was ramping up, and many companies sought to preserve vital records in the event of an atomic blast, Knaust reasoned.
In 1950, Knaust turned idea into action. Eight months and $500,000 later, Iron Mountain Atomic Storage opened its doors. Knaust hit pay-dirt.
Today, Iron Mountain Inc. (IRM) has expanded to comprise 1,350 facilities in 45 countries and six continents. Iron Mountain claims 220,000 customers, including 94% of the Fortune 1,000.
Last year, it posted just over $3 billion in revenue. Iron Mountain is far-and-away the industry leader in document storage.
Iron Mountain — which converting to a REIT last year — currently pays a $2.20 annual dividend per share that yields 6.8% at the market price.
Iron Mountain began paying a quarterly dividend in 2010. Over the past six years, the dividend has grown at a 44% average annual rate.
The recent REIT sell-off has created an enticing entry point. At around $32 per share, Iron Mountain shares sell at less than 15 times projected FFO of $2.15 for 2016. In the specialized REIT segment, 17.2 times FFO is the established multiple.
Our 12-month target price of $41 reflects a price-to-FFO multiple of 17.2 times applied to our 2017 FFO-per-share estimate of $2.41.
Iron Mountain just might be the perfect dividend stock in today’s market; it
provides not only the opportunity for significant share-price appreciation in a unique REIT niche and significant dividend growth.
By Ian Wyatt, Editor of High Yield Wealth