Updated 3/6/25
CubeSmart (NYSE: CUBE) is a real estate investment trust (REIT) that specializes in self-storage facilities across the United States. With a market capitalization hovering around $9.63 billion, the company has carved out a strong position in the storage industry, benefiting from steady demand and high operating margins.
For investors focused on dividends, CubeSmart stands out with an attractive yield of 4.92%. But beyond just the yield, it’s important to look at whether the company’s dividend is sustainable and what risks or opportunities might be ahead. Let’s take a deeper dive into CubeSmart’s dividend strength, financial health, and stock performance to see how it stacks up for long-term income investors.
Key Dividend Metrics
📌 Dividend Yield: 4.92% (Forward)
📌 Annual Dividend: $2.08 per share
📌 5-Year Average Dividend Yield: 3.98%
📌 Payout Ratio: 119.19%
📌 Dividend Growth: Consistent increases over time
📌 Ex-Dividend Date: April 1, 2025
📌 Next Payment Date: April 15, 2025
Dividend Overview
CubeSmart has been a reliable dividend payer, offering investors a steady income stream. The current yield of 4.92% is well above its five-year average, making it an appealing option for those looking for passive income. However, a key point to watch is the payout ratio, which currently sits at 119.19%. This means the company is paying out more in dividends than it earns in net income.
For a traditional company, a payout ratio over 100% would be a red flag. But REITs operate differently—they must distribute at least 90% of their taxable income to maintain their special tax status. Because of this, a high payout ratio is common. The question is whether CubeSmart’s cash flow can comfortably support these payouts going forward.
On that front, CubeSmart generates strong cash flow, with operating cash flow of $631 million over the past year. That level of cash generation suggests the dividend is backed by real earnings power, even if the payout ratio appears stretched.
Dividend Growth and Safety
Dividend growth is a big draw for long-term investors, and CubeSmart has a solid track record of increasing its payouts over time. While it may not be the fastest-growing dividend payer, it has steadily rewarded shareholders.
Several factors determine how safe the dividend is going forward:
✔ The self-storage business is resilient, with steady demand even during economic downturns. This stability helps CubeSmart maintain strong cash flow.
✔ A high payout ratio of 119.19% isn’t ideal, but it’s not unusual for a REIT. Investors should still keep an eye on this to ensure it doesn’t creep higher.
✔ Revenue growth of just 0.70% year-over-year is sluggish. If revenue stalls or declines, it could put pressure on future dividend increases.
✔ CubeSmart carries $3.1 billion in total debt, with a debt-to-equity ratio of 105%. That’s a fairly high level of leverage, meaning a significant portion of earnings goes toward debt servicing.
For now, the dividend appears secure, but investors should monitor the company’s earnings growth and debt levels to ensure long-term sustainability.
Chart Analysis
Price Action
CubeSmart (CUBE) is currently trading at $42.26, showing a slight downward bias after a period of volatility. The price has been in a downtrend since reaching a peak above $52.50 last year, with lower highs and lower lows forming a clear pattern. The stock recently attempted to stabilize around the $40 level, bouncing slightly but struggling to gain momentum.
The most recent trading session saw a modest range, opening at $42.46, hitting a high of $42.53, and closing near the low at $42.26. This suggests a lack of strong buying pressure, as sellers regained control before the session ended.
Moving Averages
The 50-day moving average (orange line) is sloping downward and remains below the 200-day moving average (blue line), which is a bearish signal. The stock’s price action has remained under both moving averages for several months, indicating that momentum is still weak.
A death cross pattern formed earlier when the 50-day moving average crossed below the 200-day moving average. This typically signals continued downside risk, and so far, the stock has not been able to break back above these resistance levels. The 50-day moving average is now acting as a dynamic ceiling for price movements, limiting any short-term rebounds.
Volume and Market Participation
Volume has been relatively stable but has shown spikes on days when the stock tested support or resistance levels. Recent selling volume appears slightly higher than buying volume, suggesting that investors remain cautious. When volume spikes occur on down days, it often indicates institutional selling rather than accumulation.
Without a significant increase in buying volume, the stock may struggle to break out of its current range. Investors will want to watch for higher volume on up days as a sign of renewed bullish interest.
Relative Strength Index (RSI)
The RSI is currently hovering around the mid-range, indicating that the stock is neither overbought nor oversold. Previously, the RSI dipped close to 30, which is often seen as an oversold condition, followed by a mild recovery. However, the lack of strong upward momentum suggests that buying pressure is not yet overwhelming.
If the RSI starts trending higher while the price remains stable, it could indicate that bearish momentum is fading. On the other hand, if it drops below 40, there could be another leg lower.
Recent Candlestick Behavior
Looking at the last five candles, price action has been relatively choppy. Some days show strong upper wicks, meaning that buyers attempted to push the price higher but were met with selling pressure. This suggests hesitation in the market. Lower wicks on some sessions show that there is buying interest near $40, but not enough to fuel a strong breakout.
Until the stock can close decisively above the 50-day moving average, it remains in a vulnerable position, where any broader market weakness could push it lower again. The upcoming sessions will be key to determining whether buyers step in or if the downtrend continues.
Analyst Ratings
📈 Upgrades
🔹 KeyBanc Capital Markets recently upgraded CubeSmart from Sector Weight to Overweight and assigned a price target of $47. Analysts cited improving operating fundamentals, with early signs of stabilization in occupancy and move-in rent growth.
🔹 Another key factor in the upgrade is CubeSmart’s lower exposure to price restrictions in major markets like Los Angeles compared to some of its competitors. This provides more flexibility in adjusting pricing strategies.
🔹 The firm also pointed out that CubeSmart’s valuation appears attractive at current levels, suggesting room for price appreciation.
📉 Downgrades
🔻 Scotiabank downgraded CubeSmart from Sector Outperform to Sector Perform, setting a price target of $46. This shift to a more neutral stance suggests that while CubeSmart is expected to perform steadily, it may not deliver returns that exceed those of its peers.
🔻 Analysts at Scotiabank expressed concerns about CubeSmart’s recent financial performance, noting some softness in growth momentum. Competitive pressures within the self-storage sector and broader economic conditions also factored into the decision.
💰 Consensus Price Target
📊 The average price target among analysts currently stands at $48.08, reflecting a potential upside of approximately 13.84% from recent trading levels. While opinions are mixed, the general outlook remains cautiously optimistic, balancing the company’s strengths with near-term challenges.
Earning Report Summary
CubeSmart recently shared its latest financial results, giving investors a clearer picture of how the company performed through the end of 2024. While the numbers showed some ups and downs, the company remains focused on steady growth and long-term expansion.
Financial Performance
In the fourth quarter, CubeSmart brought in $101.9 million in net income, a bit lower than the $112.7 million from the same time last year. That worked out to $0.45 per share, down slightly from $0.50 per share a year ago. Looking at the full year, net income came in at $391.2 million, compared to $410.8 million in 2023, with earnings per share slipping from $1.82 to $1.72.
Funds from Operations (FFO), which is one of the key measures for real estate companies, also saw a slight dip. For the quarter, adjusted FFO was $155.4 million, or $0.68 per share, down from $158.4 million and $0.70 per share last year. For the full year, CubeSmart posted an adjusted FFO of $600.8 million ($2.63 per share), compared to $609.4 million ($2.68 per share) in 2023.
Operations and Occupancy
CubeSmart’s portfolio of 598 same-store locations saw a 1.6 percent drop in revenue and a 4.7 percent increase in operating expenses for the fourth quarter. As a result, net operating income (NOI) dipped 3.7 percent year-over-year. Occupancy rates also softened a bit, averaging 89.6 percent during the quarter and finishing the year at 89.3 percent, slightly lower than the 90.3 percent seen at the end of 2023.
Expansion and Investments
CubeSmart hasn’t slowed down when it comes to expansion. The company acquired 14 new storage facilities in Texas for $157.3 million, adding to its growing footprint. They also purchased two more locations in Oregon and Pennsylvania for $22 million. After the quarter ended, CubeSmart finalized another deal, acquiring 28 additional locations across Arizona, Florida, and Texas.
On the development side, two newly built properties in New Jersey and New York opened in Q4, with a combined investment of $61.8 million. The company also has two joint venture projects underway in New York, expected to be ready by late 2025.
Third-Party Management and Portfolio Growth
CubeSmart continues to grow its management platform, now overseeing 902 properties, covering 59.1 million square feet of storage space. In Q4 alone, they added 29 new properties to the program. Overall, their consolidated portfolio includes 631 locations with nearly 46 million square feet of rentable space, and physical occupancy ended the year at 88.8 percent.
Financial Activity and Shareholder Returns
CubeSmart raised $85.6 million in the fourth quarter through its at-the-market equity program, selling 1.7 million shares at an average price of $50.21 per share. Over the full year, the company raised $118.3 million by selling 2.3 million shares.
To reward shareholders, CubeSmart also bumped up its dividend by 2 percent, raising the annual payout to $2.08 per share from $2.04. The increased dividend was paid out in January 2025, reinforcing the company’s commitment to returning capital to investors.
While CubeSmart faced some financial headwinds in 2024, the company remains focused on strategic expansion, steady operational performance, and maintaining strong shareholder returns.
Financial Health and Stability
CubeSmart is in strong financial shape, though there are a few areas to keep an eye on.
Some key positives include:
✅ A healthy operating margin of 46.51%, which allows the company to maintain profitability even if revenue growth slows.
✅ A return on equity of 13.43%, which is a solid figure for a REIT and indicates efficient use of shareholder capital.
✅ Strong cash flow, with $631 million in operating cash flow and $484 million in levered free cash flow, which supports both dividend payments and reinvestment in the business.
However, there are also some concerns:
⚠ A total debt of $3.1 billion means the company relies heavily on borrowing. If interest rates stay high, CubeSmart’s borrowing costs could rise, impacting profitability.
⚠ A current ratio of 0.44 suggests limited short-term liquidity. While not a dealbreaker, this could limit financial flexibility if unexpected costs arise.
Valuation and Stock Performance
At a share price of $43.01, CubeSmart trades at a price-to-earnings (P/E) ratio of 24.57. Compared to historical levels, this puts the stock in a fair valuation range, though not necessarily at a bargain price.
✔ The enterprise value to EBITDA ratio stands at 18.21, which is reasonable for a REIT of this size.
✔ A price-to-sales ratio of 9.00 is a bit high but aligns with other self-storage REITs.
✔ The stock’s 52-week range is $39.80 to $55.14, meaning it’s trading closer to the lower end of its range.
From a technical perspective, CubeSmart’s 50-day moving average is $41.88, while its 200-day moving average is $46.51. That suggests the stock is trading at a discount to its longer-term trend, which could present an opportunity for investors looking for a lower entry point.
Risks and Considerations
Even with its strengths, CubeSmart does carry some risks that investors should factor into their decision-making process.
📉 Interest rates remain one of the biggest concerns for REITs. Rising rates increase borrowing costs and can pressure stock prices. If the Federal Reserve keeps rates high, CubeSmart’s cost of capital could rise.
🏢 Slowing revenue growth is another issue. With only 0.70% revenue growth year-over-year, the company isn’t expanding as quickly as some of its competitors. If growth continues to slow, it could impact future dividend increases.
💰 The high payout ratio is another point of caution. While REITs often pay out the bulk of their earnings, maintaining a payout ratio over 100% indefinitely isn’t ideal. Investors should watch for any signs of financial strain.
🔻 Debt levels are also worth considering. With a 105% debt-to-equity ratio, CubeSmart is highly leveraged. If credit markets tighten, the company could face refinancing challenges.
Final Thoughts
For dividend-focused investors, CubeSmart offers a compelling mix of a high yield and stable cash flow. The self-storage industry has proven to be resilient, providing a strong foundation for consistent dividend payments. However, the company’s high payout ratio, slower revenue growth, and significant debt levels introduce some risks.
At its current price, CubeSmart is trading toward the lower end of its 52-week range, which may make it more attractive for long-term investors. However, it’s essential to monitor factors like interest rates, earnings growth, and debt management to assess whether the dividend remains sustainable in the years ahead.
While CubeSmart remains a strong player in the self-storage REIT space, investors should weigh the benefits of its dividend against the risks of high leverage and a stretched payout ratio before making any decisions.
Recent Comments