Daily Stock Pick: November 14th, 2022

Last week’s enthusiasm faded this morning as market watchers reconsidered the likelihood that the Fed will deviate from its aggressive economic tightening path. Data released on Wednesday showed a lower-than-expected increase in consumer prices, fueling hopes of a light at the end of the tunnel for the Fed’s rate hiking cycle. Many of the pros on Wall Street have warned that a single data point is not enough to call a pattern, and we are still in a bear market. Stocks sank in early trading this morning as investors took a more honest look at the possibilities for the market in the coming months.   

“We have all the short-term gauges pointed higher while the long-term gauges still point lower,” said Katie Stockton, technical analyst and founder of Fairlead Strategies. “There’s not a lot of breakouts with this move,” she said, reminding investors that it’s still a bear market rally. 

With so much market turbulence in 2022, investors have been seeking shelter among so-called “safety trades.”  Stocks with relatively low volatility that come along with a dependable payout can bring peace of mind during uncertain times. Today we’ll focus on one such stock.  

REITs offer a unique risk/reward profile that doesn’t always perfectly correlate with stocks or bonds because real estate is an asset class that’s not directly tied to traditional markets. In many situations, REITs can bolster your portfolio when markets plunge. And their above-average dividend yields are an excellent shelter in a downturn.

Boston-based, Information management services company Iron Mountain Inc. (IRM) provides information destruction, records management, and data backup and recovery services to more than 220,000 customers in 58 countries. The company has around 1,500 leased warehouse spaces and underground storage facilities worldwide. 

As a testament to Iron Mountain’s leadership in its core storage business, the company serves 225,000 customers, including about 95% of the Fortune 1000 companies. As for what the company stores, the wills of Princess Di and Charles Darwin are housed in their facilities, as well as the original recordings of Frank Sinatra and Bill Gates’ Corbis photographic collection.   

The need for Iron Mountain’s physical facilities will likely never disappear. Still, as digital storage becomes more widely adopted, the company should continue to grow along with its global data-center business, which contributed 8% of adjusted earnings in 2021. The fact it continues to generate over $2 billion per year in revenue from its core storage business while strategically growing its data center portfolio is an optimistic sign for steady growth in the coming years.  

IRM has maintained a $0.62 per share quarterly dividend since 2019 as it has been focused on steadily recovering its payout ratio from the pandemic. The AFFO came in at $0.93 for the second quarter, a 9.4% year-over-year improvement. The company uses its recurring income to pay an attractive dividend — it currently yields 4.68%. Management’s target for a low to mid 60’s % dividend payout ratio seems to be quickly approaching, after which they see the dividend increasing.