The niche I'm talking about is storage facilities. And Iron Mountain Incorporated
The Boston-based company was founded in 1951 by Herman Knaust and has since evolved into one of the leading storage and information management services companies in the United States, serving approximately 155,000 customers in 36 countries. This year, the company converted into a REIT, a classification that requires the company to pay out at least 90% of its taxable income to avoid corporate taxation.
Storage and information management services are an attractive niche that has seen solid rental growth over the years. Most companies in developed countries are required by law to secure their records and business correspondence, which in turn leads to both high demand for storage facilities and a non-cyclical revenue trend for Iron Mountain.
If anything puts a real estate-focused business on the success track, it is size and scale. A large, multinational operations footprint allows a REIT to navigate local real estate downturns and diversify its revenue base.
Iron Mountain certainly is not a small player by any means, thanks to its history of acquisitions: Its real estate portfolio now consists of more than 1,000 properties with 67 million square feet. Since Iron Mountain, according to its own statement, serves "more than 95% of Fortune 1000 companies" and operates in more than 30 countries, the REIT's cash flows and dividends are standing on solid ground.
The conversion to a REIT makes the company attractive for income investors who are looking for stable and/or growing dividends that are backed by recurring cash flows originating from Iron Mountain's storage property portfolio.
Dividend safety is an issue that's highly relevant to investors, but it shouldn't be a major concern for Iron Mountain: Companies need to store their records in good times and bad, which lends a lot of stability to Iron Mountain's revenue and dividend stream.
Investors don't always have to gravitate toward the traditional residential real estate market when looking for real estate-derived cash flows and dividend income. Storage providers with diversified revenue bases and an international footprint are just as attractive.
Kingkarn Amjaroen and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.