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This 6.9%-Yielding REIT Has A Long Runway Of Growth

May 08, 2018 8:08 AM ETIron Mountain Incorporated (IRM)49 Comments
Ploutos Investing profile picture
Ploutos Investing


  • Iron Mountain has a growth portfolio (data centers, emerging markets, and adjacent businesses) that should help to expand its business rapidly.
  • Its storage business benefits from economies of scale and higher customer switching costs.
  • The company has consistently increased its dividend in the past and has an attractive dividend yield.

Investment Thesis

Iron Mountain (NYSE:IRM) is the global leader in physical record storage. It has a growth portfolio (data centers, emerging markets, and adjacent businesses) that should help to expand its business rapidly. Its large global footprint allows it to operate efficiently. Its storage business also benefits from higher customer switching costs. As a result, the company has consistently increased its dividend in the past. Its dividend yield is currently at the high end of its historical average. This creates an attractive entry point for dividend growth investors with a long-term investment horizon.

Source: Company Website

Iron Mountain’s Growth Drivers

Iron Mountain has a strategic plan to shift revenue mix to faster growing businesses. These businesses should provide a long runway of growth for the company. These businesses include:

Data center facilities

Iron Mountain has expanded towards building data center facilities. In the past quarter, the company closed the acquisition of IO Data Centers, as well as Credit Suisse facilities in London and Singapore. Iron Mountain is also developing capacity in Phoenix and New Jersey on top of new development in Northern Virginia and Denver locations. Its global data center segment has an EBITDA margin of 44.6% in the past quarter. This is significantly higher than Iron Mountain’s overall margin of 32.9% in the past quarter.

Data center locations should provide Iron Mountain with a long runway of growth. As the chart below shows, revenues from global colocation market are expected to grow from $29.7 billion in 2016 to $48.6 billion in 2020. This is equivalent to a compound annual growth rate of 13%. The demand for data center also creates favorable outsourcing trend as service provider data centers are expected to consist about 21% of market share in 2019 (it was only 10% in 2015). Iron Mountain is well positioned to capture this trend.

This article was written by

Ploutos Investing profile picture
I am a value focused investor. Stocks rise and fall for many different reasons that we often cannot predict. Eventually, it is those companies with a wide moat and the ability to generate cash flow that prevail. Therefore, my investment focus is to find value stocks that are able to generate cash flow, with sustainable dividends and provide growth over time. I focus my attention on analyzing large-capped dividend growth stocks, REITs and ETFs. I aim at providing a quarterly update and insights on stocks I follow. Please feel free to browse the articles that I wrote and provide any comments.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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