I think that National Storage REIT (ASX: NSR) could be a retiree's dream for dividend income.
What is National Storage REIT?
As the name might suggest, it's a real estate investment trust (REIT). It's actually the largest in Australia and New Zealand with over 170 storage centres.
The business offers self-storage, business storage, climate-controlled wine storage, vehicle storage, vehicle and trailer hire, packaging, insurance and other value added services.
Why could it be so good?
Lots of retirees and investors in general are drawn to owning property. You don't have to own a residential property to get exposure to the growth in value of land prices.
National Storage is not like an office building, new warehouse or shopping centre where most of the value of the real estate is the physical structure. National Storage owns land in the form of storage units and rents them out. It's not a complicated structure. It's also not reliant on one tenant who has a lot of bargaining power over the landlord.
As the value of land rises the value of National Storage's units should go up too, whilst also being able to charge more per square metre. It's also about maintaining the right level of occupancy, which National Storage is doing. Indeed, National Storage managed to slightly increase its occupancy rate in FY19.
National Storage continues to grow its underlying operating earnings per share (EPS) thanks to the factors that I've written about above. In FY20 the REIT is expecting underlying EPS growth of at least 4%, which should mean another boost to the distribution.
Over the long-term there's the potential bonus for National Storage to sell a site when it can be rezoned to be used for residential land and developed.
The REIT has just increased its half-year distribution by 4.4% and it's currently offering a distribution yield of 4.75%. This looks like a good yield to me with how low interest rates are.
I'd prefer to be able to buy REITs at their stated balance sheet value, but who knows when REIT share prices will drop? Even so, I think at this price it could be a solid income pick.
