Get Paid While You Wait: 3 Top Dividend Stocks in Data Center REITs
Real estate investment trusts are a longtime favorite asset class of income investors. That’s because, in order to maintain their status as REITs, they are required to pay out at least 90% of their net profit as shareholder dividends.
A very promising REIT subsector is data centers, the facilities where websites and corporate networks are stored. They’re particularly attractive because of very high expected growth — according to one recent estimate from Cisco, overall worldwide IP traffic is anticipated to grow by nearly 80% between 2017 and 2020. So with that in mind, here’s a trio of data center REITs I believe have the potential to keep paying their investors well.
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Let’s start with the largest data center REIT, mighty Equinix (NASDAQ:EQIX). It towers over its peers in terms of both market capitalization and revenue.
Equinix’s customer list reads like a Who’s Who of driven, 21st-century businesses. Netflix is a client, as are Priceline Group, Oracle, and Alibaba. And these are only companies that either signed up or expanded their presence in Equinix facilities in the REIT’s third quarter.
The company’s results were stellar in that fiscal period. Adjusted revenue grew by 10%, to $1.15 billion, while its adjusted funds from operations (AFFO) increased by 9% to $391 million. And the company raised its adjusted revenue and AFFO guidance for fiscal 2017.
At the moment, Equinix’s $2 per share quarterly dividend sports a low (1.8%) yield compared to its segment peers, and especially to the broader REIT market. Still, it’s a solid company that knows how to mix asset buys with organic results to grow its business ever higher, and as such its share price and dividend should rise too.
Digital Realty Trust
It may be No. 2 in the segment, behind Equinix, but Digital Realty Trust (NYSE:DLR) is no second banana in this business. It provides its services to prominent customers such as Facebook, AT&T, and Amazon.com, among many other top companies. The REIT owns 182 data centers throughout the world, and has roughly 2,300 clients.