Last update on 2024-06-27

Public Storage (PSA) - Dividend Analysis (Final Score: 5/8)

Analyzing Public Storage's (PSA) dividend performance: A 5/8 score on an 8-criteria system. Understand UPSA's commitment to delivering value to shareholders.

Short Analysis - Dividend Score: 5

We're running Public Storage (PSA) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of Public Storage (PSA) based on an 8-criteria scoring system shows the following: 1. Dividend Yield of 3.9344% is higher than the industry average of 2.86%, reflecting well on PSA. 2. The average annual dividend growth rate is 13.96% over 20 years, well above the 5% benchmark, indicating strong growth. 3. The average payout ratio is 78.51%, higher than the desired 65%, suggesting potential sustainability issues in dividend payments. 4. Dividends are generally covered by earnings, with EPS to DPS ratio often above 0.7, though it occasionally dips to concerning levels. 5. Dividend coverage by cash flow varies, with a mix of well-covered and under-covered years, averaging around 0.83 recently. 6. PSA has maintained stable dividends without major drops, showing consistency in payouts. 7. The company has a dividend-paying history of over 25 years, indicating strong financial health and commitment. 8. Stock repurchases are inconsistent, with limited buyback activity over the past 20 years, suggesting other financial priorities.

Insights for Value Investors Seeking Stable Income

Given the analysis, Public Storage (PSA) appears to be a solid consideration for dividend-focused investors due to its strong yield, significant historical growth, and consistent payouts over several decades. However, potential investors should be cautious about the high payout ratio and variable cash flow coverage, which could imply sustainability risks. It is advisable to monitor these aspects and consider stability before making a long-term investment. Overall, PSA presents a potentially reliable option with some risks that merit attention.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the annual dividend payment relative to the stock price. It's critical for income-focused investors.

Public Storage's current dividend yield of 3.9344% is significantly higher than the industry average of 2.86%. Historically, PSA's dividend yield has fluctuated yet generally remained competitive with or above the industry average, except during a couple of notable deviations. In 2007, their yield dropped to 2.7244% against the industry’s 4.11%, and in 2021, their yield fell to 2.1358% compared to 2.16% industry average. Interestingly, the yield spiked to 7.5484% in 2022, which might have reflected temporary market conditions or a significant change in their dividend payout. Steadily higher yields post-2010 suggest attractive returns for dividend-seeking investors. This trend looks favorable as it indicates PSA's commitment to returning value to its shareholders.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate measures the annualized percentage rate of growth of us the cash dividends paid on stocks, which is crucial to assess company's return on investment.

Analyzing Public Storage (PSA)'s dividend per share ratio over the last 20 years, we observe significant variability. While some years showed robust growth (like 2023 at 164.375%), others indicated negative growth. The average dividend ratio of approximately 13.96% suggests a generally positive trend, exceeding the 5% criterion. This is a good sign, indicating healthy returns over the long term, despite the fluctuations. This variability, however, underscores the importance of stability for investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio indicates the percentage of earnings a company pays to its shareholders in the form of dividends. It's crucial to assess the sustainability of dividend payments.

The average payout ratio for Public Storage (PSA) over the past 20 years is approximately 78.51%, which is above the generally accepted threshold of 65%. This high payout ratio indicates that PSA is paying out a large portion of its earnings as dividends, which can be unsustainable, especially during economic downturns or periods of decreased earnings. The fluctuation of the ratio, sometimes exceeding 100%, signals potential risks in maintaining such high payouts. Therefore, this trend is not favorable for investors seeking stable and sustainable dividend payments.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

The ratio of Dividends per Share (DPS) covered by Earnings per Share (EPS) for Public Storage (PSA) over the years shows a fluctuating but generally favorable trend. In 2022, the EPS was $24.8158 compared to a DPS of $21.15, resulting in a coverage ratio of approximately 0.852, which indicates that earnings adequately cover the dividends. Historically, the ratio has been mostly above 0.7, with a high of 1.028 in 2020 and a low of 0.444 in 2009. This suggests that PSA has generally managed its dividend payouts prudently, ensuring they are well supported by its earnings. However, it's crucial to monitor years where the coverage dips below 0.8 as they can signify potential stress points. Overall, the trend is good but requires periodic review, especially in years with economic fluctuations.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow is a critical measure for assessing the sustainability of a company's dividend payments. This metric helps investors determine whether a company generates sufficient free cash flow to cover its dividend payments.

When analyzing Public Storage's data from 2003-2023, we notice that the dividend coverage ratio varies significantly from year to year. For instance, in 2005, 2017, and 2022, the dividends were well-covered with ratios of 1.4, 1.07, and 1.47 respectively, indicating that the company had more than enough cash flow to cover its dividend obligations. However, in 2009 and 2021, the payout ratios were notably lower at 0.62 and 0.69, signaling potential sustainability issues in those years. Generally, a dividend-covered ratio above 1 is desirable, showing that a company is not over-leveraging itself to pay dividends. Public Storage mostly falls below 1 but has shown improvement in 2023 with a ratio of approximately 0.83, which, while not above 1, indicates that the company is increasingly using free cash flows prudently to cover dividends. This mixed trend reflects both strong and less favorable periods for the company in managing its cash flows relative to its dividend payout.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments indicates consistent profitability and management's commitment to return profits to shareholders.

Public Storage (PSA) has demonstrated impressive stable dividends over the last 20 years. Despite fluctuations, PSA has avoided any drop larger than 20% in any given year. For instance, between 2003 and 2023, while there were minor dips, such as from $2.8 in 2008 to $2.2 in 2009—a decrease of approximately 21.4%—the significant increase to $21.15 in 2022 reflects strategic dividends adjustments. The jump in 2022 could be attributed to a special dividend payment or exceptionally high profits. The trend overall underscores a solid financial foundation. For income-seeking investors, this trend is reassuring as it suggests reliability and potential for future income.

Dividends Paid for Over 25 Years?

Dividends paid over an extended period, ideally 25 years or more, illustrates a company’s financial health and commitment to returning value to shareholders. It also shows resilience through different market cycles.

Public Storage (PSA) has a history of paying dividends for over 25 years, from 1998 to 2023. In 1998, PSA paid a dividend of $0.88 per share, which has grown significantly to $12 per share in 2023, peaking at $21.15 in 2022. This trend indicates a robust dividend policy and financial strength. Particularly, the surge in the dividend payout in 2022 before moderating in 2023 showcases the company's profitability and shareholder reward strategy. This consistency and growth in dividends reflect positively on PSA’s long-term sustainability, making it attractive to income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchase trends over extended periods. Aids in ownership concentration and EPS growth

Public Storage (PSA)'s stock repurchase history over the past 20 years presents a mixed bag. The firm increased its shares from 126.5M in 2003 to 175.5M in 2023, with specific repurchase years being 2008, 2009, and 2019. The average repurchase rate of 1.7433 indicates limited buybacks in 20 years, which may imply less focus on returning capital via this avenue. This trend appears inconsistent with aggressive repurchase strategies seen in highly shareholder-centric firms, possibly suggesting reallocation of financial resources into growth or operational investments.