After a deep and broad market correction last year, it's exciting to see many stocks rallying since the start of 2023. The broader S&P 500 is up 3.5% so far this year and the Nasdaq Composite has risen nearly 12%.
Tech stocks are without a doubt leading the recovery, but there are a few high-growth real estate stocks that are also soaring. Life Storage(NYSE: LSI) and Blackstone(NYSE: BX), two popular dividend stocks, are up 22% and 18% year to date, respectively, and this could just be the beginning. Here's a closer look at each company and why these stocks could keep soaring in 2023.
What's going on with Life Storage
Life Storage is one of the five publicly traded self-storage real estate investment trusts (REITs). The company, which has interest and ownership in roughly 1,100 storage facilities in 37 states across the country, has seen its share price jump by nearly 22% since the start of 2023. This rise is largely due to its fantastic earnings for the fourth quarter and full year of 2022 but it's also driven by an unsolicited offer made by its larger peer, Public Storage, earlier this year.
In early February, Public Storage made an offer to purchase the company in an all-stock transaction. The REIT rejected the solicitation saying Public Storage severely undervalued the long-term value of the company. But investors are excited about a potential buyout that could be brewing, and in turn, the stock is soaring.
Aside from the prospective deal, the company is doing extremely well. For the full year, its funds from operations (FFO) per share (think earnings per share but for REITs) grew by 28% while its net income rose by 44%. Double-digit growth at this rate isn't the norm for most real estate companies. Higher rents for storage units in the markets it operates in, in addition to steady growth within its third-party management service, helped the REIT achieve outsize results.
Self-storage operators have a fairly low cost of operation compared to other real estate industries, which means it isn't battling a rapid increase in expenses like other companies. And since its leases renew on a monthly basis, REITs like Life Storage can quickly adjust for high inflation while taking advantage of higher rental rates driven by low supply and high demand.
The REIT has outperformed the broader market over the last 10 years and it currently pays a dividend yield of 3.6% -- nearly 3 times that of the S&P 500. Given the self-storage industries' resiliency and Life Storage's position as a leading provider for storage facilities, I believe its share price should keep growing in 2023.
What's going on with Blackstone
Wall Street is bullish on alternative asset management company Blackstone. The stock is up nearly 18% since the start of the year. This is a surprising gain considering investor sentiment about the company was extremely low at the end of 2022 after mass redemption requests within its private REIT, BREIT, forced the company to cap limits.
However, the redemption requests issue has blown over and investors are realizing the company is in a much stronger financial position than previously believed. BREIT reported its largest monthly total return over the last six months in February. And Blackstone's fourth-quarter and full-year 2022 earnings were incredibly strong. Assets under management grew by 11% to $975 billion, while its fee-related earnings (its primary source of income) grew by 9%.
On March 14, Blackstone announced it would be acquiring one of the top conferences and meeting technology companies, Cvent, for $4.6 billion. The transaction is expected to close by mid-year 2023.
Demand for alternative assets is already soaring and is only expected to keep growing. Institutional investors, private investment firms, and larger companies need another option outside of traditional investments for growing their money. And Blackstone has a fantastic track record of delivering returns to its investors.
Currently, the stock pays a dividend yield of 5%, which is extremely juicy considering it also provided a 220% total return over the last five years. It's not often you see high-growth stocks that also pay such high dividend yields. But because Blackstone pays a variable dividend according to its recent performance, its payouts stay within a healthy range while the company achieves growth.
10 stocks we like better than Life Storage
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Life Storage wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of March 8, 2023
Liz Brumer-Smith has positions in Blackstone. The Motley Fool has positions in and recommends Blackstone. The Motley Fool recommends Life Storage. The Motley Fool has a disclosure policy.
