As we approach the end of what has been a rather testing year (some might use a stronger adjective here), thoughts will begin to turn about what 2017 could mean for investors, their holdings and, ultimately, their money. Although Donald Trumpsevery move has dominated headlines over the last couple of weeks, 2017s main event arguably remains Brexit.
With this in mind, lets look at the latest set of interim results from self-storage titan and FTSE 250 constituent, Big Yellow (LSE: BYG). Given our tendency to accumulate more and more stuff as we go along, could this sharebe an ideal addition to your portfolio beforeour EU departure? If not, should those already invested sell up and move on?
Encouraging interims
Todays interim figures werecertainly positive. Revenue climbed9% to 54.8m in the six months to 30 September. Adjusted profit before tax came in at 27m, a very encouraging 13% rise from last years figure of 23.9m. Cashflow rose by 10% to 28.9m after finance costs were deducted and growth was also apparent in occupancy levels. There was further cheer for income investors as the company raised its interim dividend by 12% to 13.5p per share. As many Fool readers will know, a growing dividend is just one indicator that a company is doing well. A stagnant dividend suggests something else entirely.
With such good numbers, some might regardthe markets muted reaction (a fairly negligible rise of 0.15% at the time of writing) as ratherstrange. In my view, a lot of this can be explained by CEONicholas Vetchs cautious tone regarding Brexit and how it might affect the company. Reflecting that Big Yellow is on heightened alert and that activity levels and demand are likely to be more subdued going forward was always going to take the fizz out of todays results.
Nevertheless, I thinkinvestors should take comfort from Vetchs more reassuring comments that the company has been planning for thiseventuality since 2008, andthat Big Yellow is well placed to face down most challenges. Although there are no guarantees when it comes to investing (and what next year might bring), I consider the companysdecision to under-promise and perhaps over-deliver as eminently sensible.
Safer than Safestore?
Assuming Big Yellow will be able toweather the Brexit storm, the question that immediately presents itself is whetherthis company is more deserving of your capitalthan its nearest competitor, 755m capSafestore (LSE: SAFE), particularly given the latters recent, equally positive Q4 trading update.
Trading ona forecast price-to-earnings (P/E) ratio of just under 17,shares in Safestoreare certainly cheaper than those of Big Yellow, which trades on a P/E just above19. The smaller company can also boast marginallyhigher levels of return on capital over the last few years. That said, as far as dividends are concerned, Big Yellow wins out with a yield of 3.96% penciled in for 2017. This compares favourably to Safestores forecast yield of 3.51%, even if this payout is better covered by earnings.
Ultimately, Im not sure theres much to separate the two. Given its slightly larger clout, however, Id probably side with Big Yellow at the current time.
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Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
