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Digital Realty: A Safe Dividend Growth Stock, But At A Steep Price

Published Wed, 16 Sep 2020 00:56:46 -0400 on Seeking Alpha

Seeking AlphaREITsDigital Realty: A Safe Dividend Growth Stock, But At A Steep PriceSep. 16, 2020 12:56 AM ET|| About: Digital Realty Trust, Inc. (DLR)by: Nikolaos SismanisNikolaos Sismanis Long Only, Growth, Growth At Reasonable Price, long-term horizonSummaryTogether, Digital Realty and the leading European provider of carrier and cloud-neutral colocation data center solutions, Interxion, should be able to grow at a much faster rate.
Shares are trading at a premium due to the growth and secured cash flows provided by data centers. The stock's current valuation could limit an otherwise more juicy total return potential.
While Digital Realty may be a great dividend growth play, we will stay on the sidelines and potentially add amid stronger expected returns.
In late March, we had covered Digital Realty (DLR), explaining why its shares provide a COVID-19-proof investment case, especially attractive for dividend growth investors. Since then, the company's shares have returned around 9%, after indeed maintaining a robust performance during the peak months of the pandemic. During this time, we have also covered a number of data center and cell tower REITs, as these two sub-sectors have been featuring some of the safest cash flows, suffering minimal impact, compared to the other sub-sectors. If anything, the demand for data centers has remained strong, as COVID-19 accelerated the growth of e-commerce and the need for digital services and infrastructure.
In this article, we would like to revisit the stock and assess the company based on its updated financials and prospects, to try and more accurately assess investors' expected returns.
More specifically, we will:
Go over Digital Realty's latest financials and expansion prospects Assess the stock's valuation, dividend growth, and potential investor returns. Conclude why shares could provide dividend growth investors with an investable opportunity, though the stock's total return potential lags. Financials... Read more