Back in October 2016, I initiated a position in Life Storage Inc. ("LSI"), a US-based self-storage REIT that had a history of dividend growth dating back to 2012. I completed my position in December 2016 and my cost base was about $85/share. The company increased its dividend by 5.2% in April 2017, and has not raised its payout since.
For context, LSI managed to raise its revenue and funds from operations ("FFO") by 4% and 11% respectively in 2018. Both of those figures were up again through the first quarter of 2019. Having went through various investor presentations, earnings call transcripts and quarterly reports, I can't find any reason why the dividend growth came to a halt. Based on my frustration with the stagnant dividend and the fact the company is trading near a 52-week high, I've been thinking about replacing it with another self-storage REIT.
I created the table below to compare the five largest (by market capitalization) US self-storage REITs.
Based on the 1-year dividend growth (last column), CubeSmart ("CUBE"), Extra Storage Space ("EXR") and National Storage Affiliates ("NSA") became the obvious candidates to replace LSI in my portfolio. Although NSA is the cheapest priced with a Price/FFO ratio of 13.5X and has the highest dividend yield of 4.3%, it's also by far the smallest and most geographically concentrated REIT. I'm more attracted to CUBE and EXR given their large size and geographical diversity of locations.
These types of replace or hold decisions tend to baffle me and cause a great deal of over-analysis. That said, selling and replacing LSI has been one of the potential transactions at the forefront of my mind for a while now, and I promise to keep you updated on any decisions I make via my Transactions Journal.
Are you considering selling and replacing any of your holdings? Have you been successful of these types of replacement transactions in the past?
