Top dividend-paying real estate investment trusts (REITs) for investors include Iron Mountain Inc. (NYSE: IRM), an enterprise information management company headquartered in Boston, Massachusetts.
Unstable economies tend to see great performance among REITs due to their competitive total returns, steady dividend income and long-term capital appreciation. Iron Mountain is currently touted by experts as one of the best dividend-paying REITs on the market.
About Iron Mountain
Iron Mountain is responsible for storing and protecting information and assets for more than 225,000 organizations across the globe. As one of the nation’s leading information management companies, Iron Mountain reports sound financials on a yearly basis.
The company boasts healthy revenues and increased net income for the last five years. In first-quarter 2020, Iron Mountain saw only a 1% decrease in revenue from fourth-quarter 2019. And, first-quarter 2020 net income jumped 41.1% from $37.7 million to $64 million.
Iron Mountain has a working capital ratio of about 1.13, indicating that the company is on solid financial ground in terms of liquidity. During the first quarter of 2020, Iron Mountain had liquid assets of $1.2 billion to provide ample funds to navigate uncertain times.
Performance of Iron Mountain
During the last 12 months, Iron Mountain has seen a 19.68% decrease in its stock price. As a whole, the S&P U.S. REIT Stock Index is down 11.03% during the last year and thereby casts a slightly brighter light on Iron Mountain’s poor 12-month performance. In the month of June, Iron Mountain’s stock price has risen by 6.54% to its current price of $26.10.
This increase could be partially due to the launch of Iron Mountain’s new platform InSight. InSight is the first artificial intelligence and machine learning-powered content services platform with full visual user interface on the Google Cloud Marketplace. This announcement sees Iron Mountain take a huge step forward in the AI and ML industry which should be a huge boost for its profits in the coming years.
Current Dividend Yield and Payouts
Iron Mountain has quarterly dividends of $.618, equaling $2.474 in annual payouts and a dividend yield of 9.39%. The company has an adjusted funds from operations (AFFO) payout ratio of 78%, which indicates that the dividend is well covered. Dividend yields this high often are unsustainable, especially for companies paying out more in dividends than they earn. Iron Mountain is rather unique in this matter because the company’s management remains highly committed to sustaining its dividends, even with the pressure REITs are under right now.
The records management business is a not going away anytime soon and allows Iron Mountain to report its stable and consistent earnings. For many companies, a dividend yield near 10% would indicate high risk, however, Iron Mountain does not fall into this grouping. In addition to the company’s dividend safety, it has been boosting its dividend annually for the past decade.
Chart courtesy of www.StockCharts.com
Price / Earnings Ratio
Iron Mountain’s price-to-earnings (P/E) ratio is currently 25.1. The median P/E ratio for REITs falls around 19.73 indicating Iron Mountain is valued above the industry median.
Price / Book Ratio
Iron Mountain is trading at a price-to-book (P/B) ratio of 6.76. This means that the Iron Mountain is trading well above its book value and that investors have high expectations for the company. For a company such as Iron Mountain with substantial liquid assets, this is expected.
Key Risks for Iron Mountain Inc.
- The COVID-19 pandemic has hurt the company and contributed to a 19.68% decrease in its shares price during the last 12 months.
- A high dividend yield at 9.39% requires hefty cash flows to maintain, even though the company has been able to cover its high payouts for many years.
Key Takeaways for Iron Mountain Inc.
- As a records management company, Iron Mountain is stable, and its financial statements prove it.
- The company faces high expectations from investors, indicating a solid basis for its future growth.
- The launch of InSight should prove a huge boost to earnings in the coming years and take Iron Mountain a step ahead of its competitors.
- High-dividend yields, while risky, can provide lofty payouts for shareholders.