Iron Mountain Stock: Why Inflation-Trumping High-Yielder Hit Record High
February 29, 2024
IRM Stock Is Worth Watching
If Iron Mountain Inc (NYSE:IRM) put the word “Energy” or “AI” in its name, the company might get a lot more attention from investors. Despite its reliable, high-yield dividends and share price that’s been kicking the broader market to the curb, Iron Mountain stock doesn’t seem to garner the kind of attention it should.
Perhaps it’s because people only associate Iron Mountain with paper shredding. To be fair, that is pretty boring; it sounds like an episode of The Office.
But the company does a lot more than that. It’s the global leader in storage, asset lifecycle management, and information management services.
Iron Mountain is a real estate investment trust (REIT) that stores and protects billions of valuable assets—including critical business information, sensitive data, cultural items, and historical artifacts. (Source: “About Us,” Iron Mountain Inc, last accessed February 27, 2024.)
The company’s 225,000+ customers worldwide include 95% of the Fortune 1000 companies. And with a retention rate of 98%, it’s clear that its customers like what it does. (Source: “Investor Presentation: November 2023,” Iron Mountain Inc, last accessed February 27, 2024.)
As of the end of September 2023, Iron Mountain’s real estate network included about 1,400 facilities in 60 countries. Those properties comprised an area of about 97 million square feet (the equivalent of 1,684 NFL football fields) and a volume of about 730 million cubic feet.
Little has changed since I last wrote about Iron Mountain Inc in November 2023. The company, however, has been reporting record-high quarterly financial results, and it has set its sights on even stronger growth.
In September 2022, management introduced “Project Matterhorn,” a five-year plan to capture a larger share of the REIT’s global addressable market. The plan includes investing 16% of its revenues (about $4.0 billion) over the 2023–2026 period. Management expects about $150.0 million in one-time costs per year over the 2023–2025 period.
For 2026, Iron Mountain Inc is targeting a revenues of about $7.3 billion.
Record-High Revenues & Adjusted EBITDA
For the fourth quarter of 2023, Iron Mountain announced that its revenues increased by 11.0% year-over-year to $1.4 billion. Its fourth-quarter net income came in at $29.2 million, or $0.10 per share. (Source: “Iron Mountain Reports Fourth Quarter and Full Year 2023 Results,” Iron Mountain Inc, February 22, 2024.)
The REIT’s fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were a record-high $525.2 million, up by 11.3% from $471.9 million in the same prior-year period.
Iron Mountain Inc’s funds from operations (FFO) in the fourth quarter of 2023 came in at $0.83, up from $0.74 per share in the fourth quarter of 2022. Meanwhile, its adjusted FFO (AFFO) advanced 10% year-over-year to $327.6 million, or $1.11 per share.
In the full year, the company’s revenues climbed by seven percent to $5.5 billion. Its 2023 net income was $187.3 million, or $0.63 per share. Its adjusted EBITDA climbed by seven percent in the year to a record-high $1.96 billion, while its AFFO increased by five percent to $1.21 billion, or $4.12 per share.
Commenting on the results, William L. Meaney, Iron Mountain Inc’s president and CEO, said, “We are pleased to report outstanding performance in both the fourth quarter and the full year, again resulting in all-time record Revenue and Adjusted EBITDA.” (Source: Ibid.)
By all accounts, 2024 is expected to be another year of milestones for the company. Iron Mountain Inc expects to report:
- Total revenues in the range of $6.0 billion to $6.15 billion, representing 11% growth at the midpoint
- Adjusted EBITDA growth in the range of $2.18 billion to $2.23 billion, representing 12% growth at the midpoint
- AFFO in the range of $1.30 billion to $1.34 billion, representing nine percent growth at the midpoint
- AFFO per share of $4.39 to $4.51, representing eight percent growth at the midpoint
Management Increased Quarterly Dividend by 5%
Before the COVID-19 pandemic, Iron Mountain Inc had a lengthy history of raising its dividends annually. Then, from January 2020 to the second half of 2023, management held IRM stock’s dividend steady at $0.6185 per share. (Source: “Dividend History,” Iron Mountain Inc, last accessed February 27, 2024.)
In October 2023, the company resumed its distribution hikes, increasing its dividend by five percent to $0.65 per share. Management has kept the payout at that level since then. As of this writing, that works out to a yield of 3.45%.
Typically, I wouldn’t entertain a stock with a dividend yield of just 3.45%; it barely trumps the current U.S. inflation rate. I prefer to look at stocks with dividend yields well in excess of five percent. For Iron Mountain, I’ll make an exception, but only because its share price has been doing so well.
On February 27, Iron Mountain stock hit a new record high of $75.95 per share. This put it up by 6.2% since the start of 2024, 24% over the previous six months, and 47.5% over the previous 12 months.
Thanks to Iron Mountain Inc’s record 2023 financial results and strong 2024 guidance, Wall Street analysts have become more bullish on IRM stock. They’ve raised their high 12-month share-price estimate to $80.00. This points to potential gains of about 7.6%.
Chart courtesy of StockCharts.com
The Lowdown on Iron Mountain Inc
Iron Mountain stock might fly under the radar, but it’s an excellent REIT stock for income and growth. The company has a solid balance sheet, it reported record-high fourth-quarter and full-year financials, and it issued strong guidance for 2024.
As the company’s CEO noted, the company is “well positioned to continue [its] growth trajectory in 2024, which is reflected in [its] financial guidance for double digit revenue growth.”
That bodes well for IRM stockholders.
