One growth stock I believe could be set to soar in the coming years is Big Yellow Group (LSE: BYG).
Self-storage solutions
Big Yellow Group is set up as a real estate investment trust (REIT) and is the UK’s largest provider of self-storage solutions.
REITs are property stocks that are obliged to pay out at least 90% of annual rent profits in the form of dividends. They aim to tie down their tenants to long-term contracts, which provides great stability.
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So what’s happening with Big Yellow shares currently? Well, as I write, they’re trading for 1,068p. At this time last year, the shares were trading for 1,368p, which is a 21% drop over a 12-month period. I’m not concerned by the share price drop, as many UK shares have fallen due to macroeconomic woes including soaring inflation and rising interest rates.
A growth stock with great prospects
Generally speaking, storage is a growing sector. This is because people and businesses require such space. The self-storage sector has grown exponentially in recent times throughout the UK. However, my bullish attitude towards Big Yellow stems from the fact the UK market still lags behind the US and European neighbours France and Netherlands by quite some distance. Furthermore, Big Yellow itself dominates the UK market and is looking to grow into some of these other markets too.
Moving onto fundamentals, Big Yellow has a decent track record of performance. I can see it has grown revenue and gross profit for the past four years in a row. I do understand that past performance is not a guarantee of the future.
In addition to performance, Big Yellow already possesses an enticing passive income opportunity. It sports a dividend yield of 4.2% as I write, and I believe this could only grow in the future. However, I do understand that dividends are never guaranteed.
Risks to consider and my verdict
Despite my bullish stance towards Big Yellow Group, I must note some real risks that could impact its progress. One issue is that when there is a gloomy economic outlook, like now, occupancy can dip, impacting rental income and performance.
Another risk to mention is that of competition. Although Big Yellow has a dominant position in the market, there are many others vying to increase their market share and snap up properties and space to grow their own business too.
Overall I like Big Yellow Group as a growth stock option for my holdings. I would be willing to buy some shares when I have the cash to do so.
I believe the sector as a whole has room for growth and that Big Yellow can capitalise on its current position in the UK market to capture some of this growth and turn it into future earnings, and eventually shareholder returns. Its growth to date and current passive income opportunity also helped me make my decision.
