Public Storage (PSA -1.33%) might not stand out as a top-tier dividend stock at first. While its 2.3% dividend yield is higher than the 1.5% of S&P 500, it's below the more than 3% average across the real estate investment trust (REIT) sector. Meanwhile, the REIT hasn't increased its dividend payment since 2017. 

However, what does stand out is Public Storage's dividend safety profile, which is one of the strongest in the REIT sector. Because of that, it's an excellent option for those seeking an ultra-low-risk dividend stock.

Secure any way you measure it

There are many ways to measure dividend safety. Public Storage passes each one with flying colors. For starters, the self-storage REIT generates very resilient rental income. While most self-storage leases are month-to-month, tenants tend to stay for a while. Public Storage noted on its second-quarter conference call that the average length of stay is now 39 months. Meanwhile, demand for self-storage space is resilient, staying relatively steady even during a recession. Because of that, occupancy levels and rental rates typically hold up reasonably well throughout the economic cycle, enabling the REIT to generate stable rental income. 

Meanwhile, the REIT pays a very conservative portion of its cash flow to shareholders via its dividend. Public Storage expects to generate $15.00 to $15.70 per share of core funds from operations (FFO) this year. With its current dividend payment at $2.00 per share each quarter ($8.00 per share annualized), its dividend payout ratio will be between 50.9% and 53.3% this year. That's well below the level of most other REITs, which tend to pay out 60% to 80% of their FFO. 

Finally, Public Storage has a top-notch balance sheet. The REIT ended the second quarter with $1 billion of cash and a leverage ratio at the bottom of its long-term target range of 4.0 to 5.0 times. Because of that, Public Storage has A-rated credit. It's one of only a handful of REITs with a credit rating that high.

Growing safer by the quarter

Another factor contributing to Public Storage's dividend safety is its growing FFO. The REIT has invested $7.4 billion since 2018 to expand its portfolio by 23%. That's helped drive outsized FFO per share growth. Core FFO surged 26.7% during the second quarter, driven by the strength of its existing operations -- same-store operating income was up 17.8% -- and the expansion of its portfolio.

The REIT has lots of growth still ahead. Roughly a quarter of its portfolio are properties still leasing up toward full capacity that it either recently acquired, developed, or redeveloped. That gives it lots of embedded growth in the near term, even if storage rental rates cool off should the economy enter a downturn.

Meanwhile, the company has $1 billion in cash on its balance sheet and a business generating significant post-dividend free cash flow. When combined with its top-their balance sheet, it has an enormous amount of financial flexibility to continue expanding its portfolio. The company currently has $1 billion of development and expansion projects underway. Meanwhile, with market conditions shifting due to rising interest rates, it anticipates that some interesting acquisition opportunities could emerge. Those future additions to its portfolio should help drive FFO higher, putting its payout on an even firmer foundation. 

An ultra-low-risk dividend stock

Public Storage has one of the best dividend safety profiles in the REIT sector. Because of that, investors can have a lot of confidence that the company can maintain its dividend over the long term. That makes it a great option for investors seeking to add a low-risk passive income stream to their portfolios.