I can buy 300 shares of this FTSE 250 stock for £100 in annual income

Although there are many growth stocks in FTSE 250index is also home to some very income-oriented opportunities. For example, Safestore Holding (LSE:SAFE) has been quietly leading shareholder payouts for almost 15 years in a row by an average of 14.3% each time.

The storage operator does not currently offer the most explosive yield. After all, a 3.5% fee is very similar to FTSE 100 right now. But, providing the company continues its history of increasing shareholder payouts, that could change dramatically over time. And with a price-to-earnings ratio of just 7.1, the shares look cheap too.

That is why I have already added this business to my portfolio. But how much income are investors considering that they can open for the long term?

Clicking numbers

At a 3.5% yield, I would need to invest £2,860 to earn £100 in annual income. Looking at the current price that translates into buying 300 shares. But in the long run, I may not need to invest so much.

Let’s assume that management can continue to increase shareholder payouts at the same rate we’ve seen over the past decade and a half. 10 years from now, the current yield of 3.5% will grow to 13.3% on an original cost basis.

For 300 shares, that’s an annual income of £345 – and that’s before taking into account the additional income earned if profits are reinvested along the way. Alternatively, let’s say I only wanted to earn £100. If so, this future growth pattern shows that I would only need to buy 87 shares, worth around £750.

Of course, this all depends on Safestore maintaining its current momentum of profit growth. Is that possible or is this all just a dream?

Investigating the possibility of dividend growth

A large part of Safestore’s excellent track record has been its rise in the industry. The company now controls the majority of the market share within the UK. And while it continues to expand its footprint, high levels of competition mean it is somewhat dependent on external growth in the self-storage industry.

That’s something managers don’t have much control over. And that’s why the company has started expanding into new areas. With operations now based in the Benelux region of Europe, the company is looking to replicate its UK success abroad.

Given that the European self-storage market is less developed compared to Britain, Safestore seems to have a decent head start. If successful, the growth seen so far may be just the tip of the iceberg. After all, Europe is a much bigger market than the UK.

However, expanding into new areas also comes with a few hurdles to overcome. The lack of self-storage acquisitions means that Safestore has a lot of customer education and awareness campaigns to run.

Suppose it can’t increase European awareness of its services without spending a lot of money? If so, international margins will be much smaller. And since earnings generate dividends, maintaining future payout growth may be difficult.

However, this is not Safestore’s first rodeo. 15 years ago, low self-preservation awareness was a problem in the UK. And one that the management managed to overcome. That is why, despite the challenges, I remain optimistic about the long term.