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Will This Stock’s Dividend Keep Climbing?

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Will Iron Mountain's Dividend Keep Climbing?

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

Last week, we ran a poll to see which stock you wanted us to review based on previous requests from Wealthy Retirement readers.

The winner was Iron Mountain (NYSE: IRM), a real estate investment trust, or REIT, that's focused on data management and storage.

The company pays a $0.785 per share quarterly dividend, which comes out to a 3.2% yield.

Is the dividend safe, or should investors consider getting off the mountain?

Since the company is a REIT, we're going to use adjusted funds from operations (AFFO) as our measure of cash flow.

Over the past several years, Iron Mountain's AFFO has been steadily growing. In 2024, AFFO totaled $1.3 billion, up from $1.2 billion the prior year. This year, AFFO is forecast to grow to $1.5 billion.

For most companies, I want to see a payout ratio of 75% of their cash flow or less.

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However, with REITs, I am comfortable with a company paying out all of its cash flow in dividends. By law, REITs must pay 90% or more of their earnings in dividends, and they often exist for the purpose of paying dividends to shareholders. Therefore, they usually have higher payout ratios than a typical company.

Iron Mountain paid shareholders 59% of its AFFO in dividends in 2024. According to forecasts, the payout ratio should dip to 54% this year. So its payout ratio is healthy. As long as a REIT's payout ratio is below 100%, I'm fine with it.

The company also has a solid dividend-raising track record.

It began paying a dividend in 2010 and has raised it every year since, except during the pandemic between 2020 and 2022. It began boosting the dividend again in 2023.

Chart: Iron Mountain (NYSE: IRM)
View larger image
 

So far, Iron Mountain's dividend safety looks rock-solid (see what I did there?).

Are there any concerns that could put a dent in its grade?

Find Out Here
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