What happened

Shares of Iron Mountain (NYSE:IRM) lost 1.67% in 2019, according to data provided by S&P Global Market Intelligence.

A high valuation on the shares and slow revenue growth have caused the stock price to remain flattish in recent years. Through the first three quarters of 2019, revenue advanced by just 0.6% year over year, while earnings from continuing operations were up 9.6%. 

Two men walking through a server room.

Image source: Getty Images.

So what

Iron Mountain is a leader in helping organizations store and retrieve data and records. Despite single-digit growth on the top line, the stock typically trades at a high price-to-earnings ratio because of the company's high margins and visibility in revenue. But since the company already does business with 95% of Fortune 1000 companies, there hasn't been enough growth in Iron Mountain's core market to move the stock higher lately.

Now what

Management has been investing in higher-growth areas, including emerging markets and new sales categories like fine art, entertainment services, and consumer storage. Iron Mountain also has a growing data center business, which made up 5% of total revenue in 2018. 

Also, through an initiative called Project Summit, Iron Mountain is targeting cost cuts over the next few years as it reinvests resources in greener pastures. Management expects the project to add about $200 million in annual EBITDA by 2022. That would provide a modest bump to current EBITDA, which is expected to come in at $1.43 billion to $1.45 billion for 2019. 

As investors wait for some of these initiatives to take effect, the stock currently pays a dividend yield of 8%. That looks attractive at first glance, but keep in mind that future dividend increases may be limited. The payout ratio is currently 177%, which means Iron Mountain is paying out more than it makes in annual profits. However, one of the goals with Project Summit is to increase cash flow to allow for more dividend increases over the long term. 

But investors might want to think twice before buying the stock strictly for the dividend. If profits don't grow as expected, that could mean dividend cuts down the road.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.