After having my Wells Fargo Preferred (ticker: WSF) redeemed back in late April I had planned to sit tight on my new found cash and wait for a market pull back before redeploying any more funds. However, after reviewing my Investment Advisory Rules for the Daily Dividend Account I decided that I should put some cash back to work sooner rather than later.
While I have positions in a number REIT’s (Real Estate Investment Trusts), I did not have specific exposure to the self-storage market. Although the downturn in the economy has affected some people’s ability to continue to maintain and pay rent on their storage units – the industry as a whole continues to grow quickly.
From a business owner’s prospective, owning storage units is a no brainer. You build 100 or more 10′ x 10′ rooms with steel walls and a roll-up door, wrap the building with a security fence and add a 24 hour guard. After renting them out at $1/sq ft per month or more – you can sit back and collect checks all day long! No pools to clean, no toilets to fix, no loud parties to break up… the units practically take care of themselves.
When your tenant skips town without paying – no problem! Just call in Don and Laura Dotson – auctioneers from A&E’s Storage Wars who along with Darrell, Jarrod, Dave and Barry will gladly take your ex-tenant’s goods off your hands, and pay you for their trouble! It’s amazing what treasures they find in these storage units – some times they even find gold!
With such a simple business model, I was looking for a self-storage pure play that I could move some funds into. After a little research, I found that Public Storage (ticker: PSA) uses preferred stock offerings to finance new and ongoing storage operations. I’ve always liked preferred shares because of their inherent price stability. If I can find well run company offering a good 6%+ cashflow dividend while trading below par value ($25) then that’s at least a “double” in my book.
After a little research I decided upon the PSA preferred “F” shares – currently yielding ~6.5% and trading just under par value at ~$24.90. I picked up 25 shares and redeployed about $625, which will generate $10.08 every three months starting in June, 2011. The downside of purchasing these shares is that they have been redeemable since August 2010, and like my Wells Fargo shares, could be called at any time. It’s a risk I’m willing to take.