A Rare Combination for Your Portfolio
TL;DR
Many tech companies don’t pay dividends, often leaving investors to decide between stocks that offer yield or stocks that focus on growth. However, this $36.89 billion market cap company, which has been around since 1951, offers both.
Tech isn’t known for dividends. Only a little more than half of the S&P 500’s tech sector companies offer one. And even for those that do, the yields can be paltry.
Meta Platforms (META), for example, pays a dividend that yields 0.35%. Nvidia (NVDA) yields 0.02%. Meanwhile, Amazon (AMZN) and Tesla (TSLA) don’t pay one at all.
But a rare bunch offer both appealing yield and the enormous upside potential that tech stocks are known for.
Enter Iron Mountain (IRM), a Boston-based information management firm that’s seen its stock rise 80% in 2024 while paying a dividend that spins off 2.32% quarterly.
Big Data Requires Big Storage
Iron Mountain stores and protects billions of valued assets — including critical business information, highly sensitive data as well as cultural and historical artifacts — for more than 240,000 organizations.
The company operates a real estate network of 1,400 storage facilities that accounts for 85 million square feet across 60 countries. Importantly, Iron Mountain is in the thick of an industry that is in the midst of explosive growth.
The global next-generation data storage market was valued at $62.83 billion in 2023 and is projected to enjoy a compound annual growth rate of 9.8% between 2024 and 2030, according to Grand View Research:
Much of this forecast growth is centered on the expansion of the Internet of Things in industries like retail, healthcare and manufacturing.
Because of this, companies like Iron Mountain are uniquely positioned to continue to profit from the expansion of everyday digitization alongside the emergence of AI, machine learning and cloud computing.
A Mountain of Earnings
Going back to Q2 2021, IRM has beaten earnings 12 out of 14 quarters. The company will look to keep that impressive streak going when they next report on Nov. 6. And while past performance is never indicative of future results, Iron Mountain’s growth and track record suggest more of the same for shareholders going forward.
Since 2019, the company’s seen its annual revenue grow from $4.26 billion to $5.48 billion in 2023, and on a trailing 12-month basis, it has already surpassed that figure with $5.82 billion.
According to its Q2 2024 investor presentation, 62% of Iron Mountain’s revenue is derived from storage with 38% coming from services, which has contributed to accelerated growth forecasts with the company’s Project Matterhorn operating model targeting $7.3 billion in annual revenue by 2026:
Given its lengthy existence and proven track record for both clients and shareholders, Iron Mountain is a trusted custodian of critical information: It boasts a 98% customer retention rate, with more than 90% of Fortune 1000 companies as clients.
Its Q2 earnings showed year-over-year revenue growth of 13%, adjusted EBITDA growth of 14% and a 10% increase to its quarterly dividend. Speaking of that dividend …
An Attractive, Growing Yield
As we previously mentioned, tech companies often don’t pay dividends, and if they do, they’re often not enough to lure in yield-focused investors.
With Iron Mountain, that’s not the case. Its 2.32% dividend yield has grown steadily since 2019:
That despite the company posting negative cash flow in 2023 to the tune of -$172.11 million. Iron Mountain attributes that to several factors, including higher interest rates.
But the good news for shareholders and potential investors is that rates are expected to continue falling, and the company has posted positive cash flow since 2019. Meanwhile, its dividend per share payout has grown steadily:
Follow the Money
Nearly 85% of IRM shares are held by institutional owners (e.g., commercial banks, mutual funds, hedge funds, endowment funds, venture capital funds).
The top two institutional investors — as often is the case — are asset management firms Vanguard and BlackRock, which together hold a total of 74.535 million shares valued at roughly $9.373 billion.
Another good sign? Short sellers are avoiding IRM like the plague. The company’s short float is just 3.42%. For context, dumpster fire stock Spirit Airlines (SAVE), which is down over 86% in 2024, currently sports a short float of over 33%.
Lastly, analysts are bullish on the stock, giving Iron Mountain a one-year median price target of $125.50 and a consensus rating of “Strong Buy.” Unsurprising given IRM’s recent performance. This year, the stock is up 80%. Over the past year, it’s up 109%. And over the past five years, it’s up 268%. Here’s how it (in blue) stacks up against the S&P 500 (in red) over the same period:
