In my personal portfolio I hold a diversified basket of REITs. They allow me to have exposure to income-producing real estate, without actively managing properties myself.
As a REIT investor, I can diversify my real estate investments across many different sectors, industries and locations.
Buy-and-let real estate investors in most cases only own one type of real estate - residential.
REIT investors can own a part of thousands of properties in all types of real estate across the world - from residential real estate in New York to data centers in Singapore, the choice is yours as a REIT investor.
It is also totally passive - you don't have to deal with evicting tenants or managing trash collection, professional REIT management does all that for you.
Currently most undervalued REIT
I currently find Iron Mountain(IRM) to be an undervalued high yield REIT with strong prospects.
Iron Mountain is a very unique REIT as it focuses on storage and information management across the globe.
The company's mission is:
"To be the trusted guardians of the assets most important to our customers, securing their past, present and future value"
Around 95% of Fortune 1000 companies are IRM's clients.
They store a variety of records, data and goods at IRM's secure locations. Documents that legally have to be stored for a set amount of time, expensive art and most recently - digital data.
Around 50% of hard records stored at IRM stay at the location for an average of 15 years.
This is a very "sticky" business, as IRM receives a fee for storing the documents for a long duration.
The company is also adapting to modern times - investing in data centers to store digital data.
The combination of the steady "old-school" document storage and the fast-growing new data center segment make it an attractive investment in my opinion.
High-Yield Dividend
Iron Mountain's current dividend is a mouth-watering 8.36%
Whilst normally such a high yield might be a warning sign, in IRM's case they can comfortably cover the dividend through the cash flows generated.
On aFFO basis, the dividend is covered with a 82% payout ratio. The company expects the payout ratio to glide to an even safer 60-70% level as aFFO grows over the next few years.
Company statement from recent presentation:
"Committed to sustainable dividend while reducing payout ratio over time"
IRM has raised the dividend for 9 consecutive years now and is set to join the illustrious list of Dividend Contenders if it raises the dividend in 2021 for the 10th consecutive year.
Using my Dividend Growth Calculator, I estimate that this company can provide significant income on current investment by the time I retire, especially if I keep re-investing dividends in the meantime.
Summary
REITs are a great way to invest in all types of real estate globally, without the added workload that comes from owning the physical property privately. I see Iron Mountain as the most undervalued high-yield REIT on the market currently. Income-oriented investors should look further into it to see if it fits their investing goals and risk tolerance.
Disclaimer: I am long IRM. This is NOT an investing recommendation. You can lose your invested capital. I am not a financial professional of any kind. The article published should NOT be considered to be investing recommendation or basis for financial planning. Before making any investing or financial decisions, contact an appropriate professional. All content on this website is for entertainment purposes only.
