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.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Biggest Airports in the World

The 5 Most Gang Infested Cities In America

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!