The Nasdaq is where fortunes have long been made and lost and made again, and over the long run, the companies on that tech-heavy exchange have proven to be solid investments, especially for those who have bought and held such titans as Microsoft and Amazon, or index funds that follow the Nasdaq in various iterations.
But you don't have to focus on tech to see such returns. There are some staid real estate investment trusts (REITs) that have performed just as well, including Extra Space Storage (EXR +1.99%).
The self-storage REIT lays claim to being the country's second-largest owner and/or operator of such properties, with about 1.7 million units across 2,388 locations, and it's the largest self-storage management company when you focus just on the facilities it operates under contract for third-party owners.
NYSE: EXR
Key Data Points
And it's about to get a whole lot bigger. Later this year, the REIT is expected to close on its acquisition of Life Storage (LSI +0.00%), which will give it a total of about 3,500 locations and control of about 14% of the U.S. market. That will push Extra Space Storage past Public Storage (PSA +2.84%) as the largest player in the industry.
Hanging with the big guys in the Nasdaq-100
The self-storage business got an extraordinary boost during the pandemic as people and businesses downsized, moved around, and in general reorganized their lives and spaces.
This chart shows how that helped drive Extra Space Storage's total return over the past three years to surpass that of the Invesco QQQ Trust (QQQ +0.56%), a $200 billion exchange-traded fund that tracks the Nasdaq 100, an index of the largest non-financial stocks on the Nasdaq exchange.
Data source: YCharts.
Now let's look at dividend income. REITs are required by law to distribute at least 90% of their taxable income to shareholders via dividends every year, and Extra Space Storage has established itself as a passive income machine. The company has boosted its payouts for 14 straight years. Since 2020, it has increased the dividend at an annualized rate of 19% a year, and at the current share price of about $148, it yields about 4.4%.
The Invesco QQQ Trust ETF, by contrast, yields about 0.6%, and its annual dividend of $2.15 hasn't moved much over those same three years.
This chart compares the yield for those two choices.
Data source: YCharts.
A good mix of growth, income, and stability
Extra Space Storage is not on the Nasdaq, but it is an S&P 500 component, which means its stock price also is supported by the vast amounts of investments in funds that track that index.
Total return, of course, is a function of both dividend payouts and share-price movement, and I'm not here to tell you that the tech titans that dominate the Nasdaq aren't worth holding through an investment like the Invesco QQQ Trust. It has proven itself over the long run and likely will again.
But for a good mix of income, capital appreciation potential, and stability, Extra Space Storage is also certainly worthy of consideration, especially for growth-and-income or income investors such as retirees.
After all, the work-from-home trend appears to be no longer just a trend, but a persistent reality, and that will add emphasis to the demand for self-storage space -- and for this REIT's stock.
