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I feel FTSE 250 shares are among the most enjoyable on the market. Not like the FTSE 100, plenty of companies on the index are much less well-known. However meaning I can discover hidden gems which have the potential to offer me with good-looking positive factors.
One I’ve had my eye on for a while now’s Safestore (LSE: SAFE). I first opened a place within the inventory final 12 months. Right this moment, I’m sitting on a 9.1% achieve.
That’s all effectively and good, however that’s a short-term achieve. I purchase for the long term. Ought to I hold shopping for extra shares?
An unloved gem?
It’s not been the best 12 months for Safestore. The truth is, it appears the inventory has fallen out of favour with traders.
Throughout that point, 10.7% has been shaved off its worth. It’s not bought off to the best begin in 2024 both, falling by 3.4%.
That stated, it has seen spectacular development within the final 5 years. Throughout that point, it’s up 55.8%.
So why are traders shunning the inventory? Properly, to be trustworthy, I’m undecided. I feel there’s a lot to love.
One main constructive I see with Safestore is the chance it offers to generate passive revenue. It gives a 3.6% dividend yield, which is barely above the FTSE 250 common.
Nevertheless, there’s one thing else that excites me extra. I’m interested in the willingness the agency has proven to hike its dividend. That’s been the case for the final 13 consecutive years. Throughout this time, the dividend grown by over 400%.
After all, dividends are by no means assured. Nevertheless, its dividend is roofed 1.6 instances by earnings, so I feel it needs to be secure.
Ambitious plans
I discussed earlier than that I purchase for the long run. That’s another excuse I like Safestore. With over 130 UK shops, the agency is the frontrunner within the home market. However it’s not stopping there. It has plans for worldwide enlargement within the years forward.
Within the final 12 months or so, it added quite a few growth websites to its portfolio. This consists of areas such because the Netherlands and Spain. Extra lately, it entered a three way partnership in Germany. On prime of that, £400m in revolving credit score facility may sign the agency is eager to proceed increasing. These formidable strikes are what I prefer to see as a shareholder.
The drawbacks
Whereas I’m bullish on Safestore, there are just a few points that include the inventory.
For instance, the agency is sitting on round £800m in debt. Now, that’s not too unhealthy. Nevertheless, hiked rates of interest will make this costlier to scale back.
So as to add to that, larger charges could imply property prices extra to buy and repair. It could additionally see Safestore’s rental revenue take a success as companies decide to chop storage prices.
I’m nonetheless shopping for
However, I’m nonetheless shopping for the inventory right this moment. And the place there are short-term considerations, I see massive development within the business within the instances forward. Buyers could have been neglecting Safestore, however I see that as the right time to purchase. If I had the money, I’d snap up some shares.
