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Public Storage Common Stock: Fairly Valued, Limited Upside

  //stocks-investing.news-articles.net/content/202 .. e-common-stock-fairly-valued-limited-upside.html
  Published in Stocks and Investing on Friday, February 20th 2026 at 18:06 GMT by Seeking Alpha
      Locales: California, Texas, Florida, New York, UNITED STATES

Public Storage: A Solid, But Mature, REIT

The fundamentals of Public Storage remain robust. Occupancy rates, while subject to cyclical pressures, consistently hover around the 95% mark, and same-store revenue growth, while moderating, remains positive. The self-storage industry has proven remarkably resilient, benefiting from demographic trends like downsizing, relocations, and the increasing demand for flexible storage solutions. However, the question for investors isn't whether Public Storage is a good company, but whether the common stock currently presents a compelling value.

Currently trading at a price/funds from operations (FFO) multiple of 18.5x - aligning with sector averages - and yielding around 3.4% in dividends, the common stock appears fairly valued. While not overvalued, it doesn't offer the significant upside potential that some investors might seek. The company's growth, while steady, is expected to be incremental rather than explosive, given its already dominant market position. Further expansion will likely involve smaller acquisitions or organic growth, neither of which is expected to dramatically alter the company's trajectory.

The Allure of Public Storage Preferred Shares

This is where the preferred shares enter the picture. Public Storage has strategically issued multiple series of preferred stock, and these instruments present a compelling alternative for income-focused investors. Preferred shares offer several advantages over common stock. Primarily, they prioritize dividend payments - holders are paid before common shareholders. Critically, in the event of financial distress or bankruptcy, preferred shareholders have a senior claim on assets, offering a degree of protection not afforded to common stockholders.

As of today, February 20th, 2026, several preferred series remain active and worthy of consideration:

• PSA-K (Public Storage Series K Preferred): Currently yielding approximately 5.875%, with a call date of October 15th, 2026. This series offers a relatively short timeframe before the call date, potentially offering a good entry point for investors seeking a near-term income opportunity.
• PSA-L (Public Storage Series L Preferred): Yielding around 6.25%, and callable on October 15th, 2028. This series balances yield with a slightly longer call protection, providing a more extended income stream.
• PSA-M (Public Storage Series M Preferred): Offering the highest current yield among the three, at approximately 6.50%, but with the furthest call date of October 15th, 2031. This provides the most significant long-term income potential, albeit with a potentially lower price appreciation opportunity.

These yields represent a substantial premium over the common stock's dividend, and also stack up favorably against current prevailing rates for other fixed-income instruments, including corporate bonds and government securities. The higher yield compensates investors for the slightly increased complexity of preferred stock, while the seniority in the capital structure provides a degree of safety.

Assessing the Risks

While preferred shares offer attractive characteristics, investors must be aware of the inherent risks.

Interest Rate Risk: As with all fixed-income investments, rising interest rates can negatively impact the value of preferred shares. When rates climb, newly issued bonds and preferred stock will offer higher yields, making existing, lower-yielding securities less attractive. This can lead to a decrease in the market price of PSA's preferred shares.

Call Risk: Public Storage retains the right to "call" the preferred shares, effectively redeeming them at the call price. This would terminate the investor's income stream. However, the call dates are several years out, offering a substantial buffer. Furthermore, a call is more likely to occur if interest rates decline significantly, allowing Public Storage to refinance at a lower cost. In this scenario, investors would receive their principal back, but would need to reinvest at lower rates.

Liquidity Risk: While PSA preferred shares are actively traded, their liquidity may be lower than that of the common stock. This could result in wider bid-ask spreads and potentially make it more difficult to sell shares quickly at a desired price.

Investor Takeaway

Public Storage remains a fundamentally sound REIT, but its common stock appears fairly priced. For investors prioritizing income and seeking a degree of capital preservation, the preferred shares - particularly PSA-K, PSA-L, and PSA-M - present a more compelling opportunity. The higher yields, coupled with the seniority in the capital structure, make them an attractive addition to a diversified income portfolio. Investors should carefully consider their risk tolerance and time horizon before investing, paying close attention to prevailing interest rate trends and the specific terms of each preferred series.