We recently published a list of Dividend Achievers List: Top 15. In this article, we are going to take a look at where CubeSmart (NYSE:CUBE) stands against other dividend achievers.
Dividend investing has become increasingly popular over time, as generating regular income remains a key focus for investors. Companies that consistently raise their dividends are particularly appealing, offering not just earnings but the potential for increasing income. Investors typically look for a minimum of 10 years of dividend growth, which is where “dividend achievers” come in. These are companies that have raised their dividends for at least 10 consecutive years.
Dividends play an important role in the overall returns. Over the past 25 years, nearly half of the total return from U.S. equities has come from reinvested dividends and the power of compounding. The broader market achieved an average annual total return of 7.4% during this period, with 55% coming from price gains and 45% from reinvested dividends, as reported by Bloomberg.
Dividend growth stocks have consistently delivered solid returns over time. The Dividend Aristocrats Index, which tracks companies that have increased their dividends for at least 25 consecutive years, has performed well historically. In a January 2019 blog post titled “Exploring Dividend Growth Strategies for Market Downturns,” Phillip Brzenk, S&P’s global head of multi-asset indexes, examined the performance of dividend growth strategies, particularly during market downturns. It was noted that the dividend aristocrats index outperformed the market in 53% of cases, with an average outperformance of 0.16%. In declining markets, the aristocrats outperformed over 70% of the time, with an average gain of 1.13%. However, in rising markets, they underperformed 56% of the time, though the average underperformance was smaller, at -0.34%. This suggests that the dividend aristocrats provided downside protection during months when the broader market experienced losses.
Dividend growers can also help protect against inflation. As rising prices erode investors’ wealth, companies that consistently increase their dividends offer a way to counteract this. While interest rates may seem appealing today, they might not hold the same value in the future. On the other hand, investing in companies with strong business models, assets, and strategies that support long-term dividend growth is often more attractive than opting for short-term, higher-yield investments. A report by Abrdn PLC also highlighted that, over the past 20 years, companies that began paying dividends or consistently increased them outperformed the global index. These dividend growers and initiators also outshined companies that paid dividends without increasing them, as well as those that didn’t pay dividends at all. In addition, the report noted that dividend-growing companies experienced lower volatility and delivered better risk-adjusted returns during this period.
That said, high-yield dividend stocks aren’t necessarily a poor choice. Analysts suggest seeking yields in the 3% to 6% range. According to Nuveen, stocks that pay dividends and also show steady dividend growth can be a sign of quality, as they demonstrate a company’s ability to balance dividend payouts while reinvesting capital to support future growth. With this, we will discuss the dividend achievers’ list.
Our Methodology:
For this list, we looked at a group of dividend achievers, which are known for raising dividends for 10 years or more. From this list, we chose companies with the highest dividend yields as of September 22 and arranged them in order from lowest to highest yield.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A row of self-storage units in a self-storage complex, showing the affordability and security offered by the company.
CubeSmart (NYSE:CUBE)
Dividend Yield as of September 22: 3.78%
CubeSmart (NYSE:CUBE) ranks twelfth on our dividend achievers list. The American real estate investment trust company invests in self-storage facilities across the country. In September, RBC Capital began coverage on REITs, giving CubeSmart an Outperform rating. The firm expressed favor for the company’s strong presence in the New York City area, where supply challenges have diminished more quickly than in the broader market, potentially supporting continued rent growth. Analysts noted that CubeSmart’s 3PM business ranks among the best in its sector, and the company’s smaller size means that adding new locations has a greater impact. They also highlighted the company’s unique geographically diverse portfolio compared to other storage REITs, with its third-party management platform adding significant value. Additionally, RBC Capital praised its strong balance sheet, noting its low leverage offers room for future acquisitions, and set a price target of $56.
In the second quarter of 2024, CubeSmart (NYSE:CUBE) reported revenue of $266.2 million, up 2.07% from the same period last year. The company’s data-driven approach to operations continues to enable it to optimize performance despite shifting macroeconomic conditions. During the quarter, it added 39 stores to its third-party management platform, raising the total number of stores managed to 879.
CubeSmart (NYSE:CUBE) is favored by investors due to its strong dividend history. The company has raised its payouts for 15 consecutive years. In the past five years, it has raised its payouts at an annual average rate of 10%. The company currently offers a quarterly dividend of $0.51 per share and has a dividend yield of 3.78%, as of September 22.
Insider Monkey’s database of Q2 2024 indicated that 23 hedge funds owned stakes in CubeSmart (NYSE:CUBE), compared with 25 in the previous quarter. These stakes have a total value of over $225 million.
Overall, CUBE ranks 12th on our list of Dividend Achievers. While we acknowledge the potential of CUBE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CUBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.