Iron Mountain Incorporated (IRM): This Stock’s Dividend Could Double on Successful REIT Conversion

Cintas Corporation (NASDAQ:CTAS) is the largest uniform rental company in the U.S., with uniform and ancillary rentals, first-aid and safety products accounting for more than 90% of its revenue. Document-management services, mainly relating to shredding, are responsible for the remaining revenue contribution. With a significant amount of the revenue in document-management services derived from the sale of shredded paper to paper recyclers, Cintas is also far more dependent on paper prices than Iron Mountain.

Cintas Corporation (NASDAQ:CTAS) revised the upper end of its full-year fiscal 2013 EPS guidance from $2.54 to $2.58 on the back of record quarterly revenue in the third quarter, which was led by better-than-expected uniform rentals. I am not considering Cintas, given its cyclical exposure to U.S. job growth.

Sovran Self Storage Inc (NYSE:SSS) is a REIT focused on acquiring and managing self-storage facilitates. It has 471 self-storage facilities in 25 states across the country, of which 121 of them were acquired in the past two years. Despite being a REIT, Sovran is less cyclical since demand for storage is relatively inelastic and independent of economic cycles.

Sovran Self Storage Inc (NYSE:SSS) raised its full-year fiscal 2013 net operating income growth estimates guidance from a range of 5.0% to 5.5% to between 6.0% and 7.0% on higher rental rates and customer traffic in the first quarter of fiscal 2013. However, I am concerned about Sovran’s gearing, which has increased from 13% at the end of 2009 to 83% now. Moreover, it is expensive at 2.6 times P/B, close to the 10-year high P/B of 2.8.

Conclusion

Iron Mountain Incorporated (NYSE:IRM) boasts of high customer retention rates due to high customer switching costs and the element of stickiness associated with document-storage box rental. While revenue growth in recent years has been flat, I am optimistic on increased penetration of international emerging markets leading to a stronger growth outlook. It is reasonably valued at 10 times trailing-12 month EV/EBITDA and sports a 4.0% forward dividend yield. I will recommend buying Iron Mountain, with a successful REIT conversion as the catalyst for a re-rating of the stock.

The article This Stock’s Dividend Could Double on Successful REIT Conversion originally appeared on Fool.com and is written by Mark Lin.

Mark Lin has no position in any stocks mentioned. The Motley Fool recommends Cintas. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!