CubeSmart Offers 4.3% Dividend Yield, Double-Digit Percentage One-Year Total Return (CUBE)

As many commercial real estate trusts (REITs) struggle financially — especially in the retail segment — CubeSmart, L.P. (NYSE:CUBE) is offering its shareholders a 4.3% dividend yield that has grown at a double-digit-percentage annual rate over the past eight consecutive years.

In addition to the strong dividend advancement over the past several years, the company’s share price, which has been declining since March 2016, is showing signs of trend reversal in the past six months. Over the past year, the share price has gained more than 8% and combined with the dividend income distribution to reward company’s shareholders with a double-digit-percentage total return over the past 12 months.

The next ex-dividend date will occur on March 29, 2018, and the company will distribute its next dividend on its April 16, 2018, pay date.

CubeSmart, L.P. (NYSE:CUBE)

CubeSmart, L.P. is a self-administered and self-managed real estate investment trust (REIT). Unlike many other REITs focusing on commercial retail space that are struggling to remain profitable, CubeSmart’s main focus on the self-storage market appears significantly more profitable. Only a small portion of CubeSmart’s portfolio consists of retail-related assets. According to the 2018 Self-Storage Almanac, CubeSmart is one of the top three owners and operators of self-storage properties in the United States. The company owns and operates nearly 1,000 facilities in 34 states and the District of Columbia. In addition to traditional self-storage unit facilities, the company offers temporary moving storage, short term-business storage and vehicle storage — for long-term and seasonal storage of cars, boats, recreational vehicles (RVs), all-terrain vehicles (ATVs), personal watercrafts and motorcycles.

The company’s current quarterly dividend of $0.30 is 11.1% higher than the $0.27 payout in the same period last year. This current distribution amount converts to a $1.20 annualized payout for 2018 and currently yields 4.3%. CubeSmart’s current 4.3% yield is nearly 50% higher than the company’s own 2.9% average yield over the past five years and 15% higher than the 3.74% simple average yield for the entire Financial sector.

The company started distributing dividends in 2005 and raised its annual dividend the following year as well. However, before CubeSmart could turn the rise into a multi-year streak, the effects of the 2008 financial crisis forced the company to cut its annual dividend more than 90% from $1.16 in 2007 to $0.10 for 2009. After another $0.10 annual distribution in 2010, the company resumed raising its dividends by nearly tripling its annual dividend for 2011 to $0.28.

Since resuming the dividend hikes, the company has boosted its annual dividend payout at an average annual rate of 36.4% and multiplied its total annual payout 12-fold over the past eight consecutive years. Even if we disregard the steep hike in 2011, the company still managed to enhance its total annual distribution 330% by raising the annual payout at an average growth rate of 23.1% per year for the past seven consecutive years.

The company’s share price has declined steadily and lost nearly 30% between March 2016 and its recent 52-week low in early July 2017. That 52-week low of 22.94 on July 10, 2017, was more than 10% below the $25.80 level from the beginning of the trailing 12-month period in early March 2017. However, after bottoming out in early July 2017, the share price ascended nearly 30% and reached its 52-week high of $29.65 by December 18, 2017.

The share price reversed trend and started declining again after the December peak. By the end of January, the share price had lost more than 7% and then declined another 7.6% in just the first week of February during the overall market selloff.

However, the share price recovered all its losses from that one-week drop by March 7 and gained another 17% on top of that to close on March 20, 2018 at $27.80. This closing price was 6.2% below the December peak but 1.2% above the price level from January 31, 2018, 7.8% higher than it was 12 months earlier and 76% higher than it was five years ago.

While the share price did experience a slight pullback in 2018, the asset appreciation combined with the robust dividend income to reward the company’s shareholders with an 11.2% total return over the past year. Additionally, the three-year total return on shareholder investment came in at 37%, despite the 30% share price decline between March 2016 and July 2017. The shareholders doubled their money over the past five years with a 105% total return over that period.

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