It has been a couple of years since I last took a serious look at Public Storage (NYSE:PSA), and shares now are trading remarkably close to where they were then. Far and away the leader in America's massive self-storage industry (which boasts 5.4 square feet of storage space for each and every person in the country), the real estate investment trust (REIT) surged during the first half of 2019, only to reverse course in the second.

Besides lots of competition popping up -- storage facilities are cheap to construct and manage compared with other types of commercial real estate -- interest rates have been a factor. Rising rates put pressure on fixed assets while falling rates typically provide a tailwind for them.  

PSA Chart

Data by YCharts

However, with the Federal Reserve now signaling it plans to keep the benchmark fed funds rate stable through 2020, and Public Storage shares down more than 20% from their 2019 peak (the market may have been hoping interest rates would keep dropping), this looks like an opportune time for investors interested in a solid dividend performer to buy the stock.

A couple moving boxes from outside into a home.

Image source: Getty Images.

2019 in review

After revenue grew 1.5% and funds from operations (FFO) rose 3.2% in 2018, Public Storage has been turning in another year of solid results in 2019. The huge operation known for its bright orange units will never be a sizzling growth play, but those steady, low-single-digit returns should be music to investors' ears -- especially in an environment where so many new storage facilities are opening as businesses seek to capitalize on America's insatiable demand for extra space.  

Metric

9-Month Period That Ended Sept. 30, 2019

9-Month Period That Ended Sept. 30, 2018

Change

Revenue

$1.796 billion

$1.770 billion

1.5%

Total operating expenses

$506 million

$481 million

5.1%

FFO per share

$7.86

$7.68

2.3%

Weighted average square-foot occupancy

93.6%

93.3%

0.3 pp

FFO = funds from operations. Pp = percentage point. Data source: Public Storage.  

The increase in profits came in spite of a big hike in marketing expenses this year as management leveraged its brand recognition and large footprint to stave off competitors. Marketing expenses for the first three quarters totaled $34.8 million, compared with to just $23.2 million during the same period last year. That's taking a bite out of the bottom line now, but management said it expects to see the payoff from its promotional activity in the years ahead. The rising occupancy rate this year is likely a harbinger of that.

America's need for space isn't going anywhere

Public Storage's slow-and-steady approach isn't winning it big gains right now as the economy continues to expand. The company doesn't make liberal use of debt to build and acquire new properties, a strategy its peers like Extra Space Storage, Life Storage, and Pure Storage have resorted to in recent years. When tough times arrive, though, those that are carrying too many liabilities could be at a disadvantage.

PSA Debt To Capital (Quarterly) Chart

Data by YCharts.

Due in large part to its incredibly low debt, Public Storage has low operating costs and can remain profitable even in times of distress. As fellow Fool.com contributor Matthew Frankel has pointed out before, this storage REIT says it could still break even if its occupancy rate dropped to just 30%. Given that it's currently 93.6% occupied, there is a huge margin of safety here.

That means FFO per share should continue to edge higher (it's up 17% total in the last three years) and the quarterly dividend of $2 per share -- which has held steady at that level since the end of 2017 -- should eventually get a boost too. As of this writing, Public Storage shares are yielding 3.8% a year.

All told, this isn't the most exciting REIT around, but Public Storage is a solid bet on America's need for places to keep its stuff. With shares back near multiyear lows, this looks like a good time to make a buy if conservative, income-generating investments are your game.