Many people think coronavirus will destroy the value of most real estate investment trusts (REITS). However, there is one REIT that could grow because of COVID-19: The Digital Realty Trust (DLR).
The Digital Realty Trust (NYSE: DLR) owns 280 data centers in 22 countries on six continents. Thus the Digital Realty Trust makes money from the growth of the Cloud, social media, Fintech, the Internet, and e-commerce.
Moreover, the Digital Realty Trust can grow as work shifts from the office to people’s homes and the Cloud. To explain, a company could need more data center space if it moves most of its business onto the Cloud.
Can Digital Realty Trust Grow with the Cloud?
Cloud-based businesses need secure servers and a place to keep those secure servers. The Digital Realty Trust leases secure server space at its Data Centers.
Some companies are abandoning brick and mortar offices but expanding online. Pinterest paid $89.5 million to end the lease on a San Francisco office building its people never moved into, SF Gate reports. Instead, most of Pinterest’s employees will work from home through the Cloud.
Thus Digital Realty Trust can grow as traditional REITs that own office buildings, and retail stores shrink. To explain, brick and mortar stores and office buildings are sitting empty because of coronavirus. Thus, the REITs that own those buildings lose money because they have fewer tenants.
The Digital Realty Trust grows
Mr. Market believes the Digital Realty Trust (DLR) will grow because he buys its stock. In 2020, Digital Realty’s share price grew from $118 on 2 January to $159.06 on 11 October.
Moreover, Stockrow estimates Digital Realty Trust’s revenues grew at a rate of 24% in the quarter ending on 30 June 2020. In contrast, Digital Realty’s revenues grew at a rate of 1.08% in the quarter that ended on 31 March 2020.
In 2020, Digital Realty Trust’s quarterly revenues grew from $787.46 million on 31 December 2019 to $823.34 million on 31 March 2020. Those quarterly revenues grew again to $993 million on 30 June 2020.
The Digital Realty Trust is capable of both share value and revenue growth. However, investors will ask if it makes money.
Does the Digital Realty Trust Make Money?
The Digital Realty Trust (DLR) is making more money. For instance, Digital Realty’s quarterly operating income grew from $100.05 million on 31 March 2020 to $152.81 million on 30 June 2020.
Plus, Digital Realty’s quarterly gross profit grew from $487.71 million on 31 December 2019 to $511.96 million on 31 March 2020 to $611.91 million to 30 June 2020. However, Digital Realty’s quarterly common net income fell from $315.58 million to $202.86 million to $53.68 million in the same period.
Impressively, Digital Realty Trust is generating more cash. Digital Realty’s quarterly operating cash flow grew from $226.66 million on 31 March 2020 to $485.71 million on 30 June 2020. However, Digital Realty’s quarterly operating cash flow fell from $401.87 million on 31 December 2019.
Digital Realty Generates More Cash
Importantly, Digital Realty Trust’s quarterly ending cash flow grew from $81.85 million on 31 December 2019 to $258.70 million on 31 March 2020 to $260.33 million on 30 June 2020.
Thus, Digital Realty (DLR) generates more cash, but it also borrows more money. Digital Realty’s quarterly financing cash flow grew from -$759.79 million on 31 December 2019 to $91.01 million on 31 March 2020 to $313.82 million on 30 June 2019. However, I think Digital Realty could borrow more money to take advantage of opportunities coronavirus creates.
Importantly, Digital Realty is accumulating more cash in 2020. The Trust’s cash and short-term investments grew from $89.92 million on 31 December 2019 to $246.68 million to 31 March 2020 to $505.17 million on 30 June 2020.
Impressively, Digital Realty’s total assets grew from $23.068 billion on 31 December 2019 to $33.113 billion on 31 March 2020 to $33.863 billion on 30 June 2020. Therefore, Digital Realty’s value is growing.
What Value Does Digital Realty Trust offer?
Besides growing value, the Digital Realty Trust (NYSE: DLR) offers an appealing dividend.
Digital Realty paid a $1.12 quarterly dividend on 14 September 2020. That dividend grew from $1.08 on 12 December 2019.
Overall, Dividend.com estimates an annual dividend of $4.25 and a dividend yield of 2.71% on 9 October 2020. Therefore, I consider Digital Realty an excellent dividend stock. Moreover, Digital Realty is an excellent dividend stock with growing value.
Currently, Digital Realty offers space for Data Centers, Connectivity, Cloud Computing and Digital platforms. Digital Realty operates in the Artificial Intelligence (AI), Networks, Cloud, Digital Media, Mobile, Financial Services, Healthcare, and Gaming Sectors.
Digital Realty claims its customers include IBM (IBM), LinkedIn, Clear Channel, AT&T (T), Verizon (VZ), and Adobe (ADBE). Digital Realty owns data centers in North America, Europe, Australia, China, Singapore, South America, South Korea, and Africa.
Digital Realty’s Bright Future
I think Digital Realty’s future is bright because of the Cloud’s explosive growth. For instance, Gartner Inc. estimates the public cloud services market will grow by 6.3% from $242.7 billion to $257.9 billion in 2020.
Gartner predicts that Worldwide Public Cloud Services Revenues will grow from $242.697 billion in 2019 to $364.062 billion in 2022. In particular, Gartner projects Cloud System Infrastructure Services (IaaS) revenues from $444.57 billion in 2019 to $80.98 billion in 2022.
Meanwhile, Worldwide Cloud Application Infrastructure Services revenues could grow from $37.512 billion in 2019 to $72.0.22 billion in 2022.
How Digital Realty Grows with the Cloud
Moreover, Gartner estimates global desktop as a service (DaaS) will grow by 95.4% to $1.2 billion in 2020. I think DaaS is growing because it offers all the services people need to work from home. Gartner predicts Global DaaS revenues could grow from $616 million in 2019 to $2.535 billion in 2022.
For example, a DaaS solution could give a company’s accounting staff access to all of its financial data and financial solutions. Thus, a company’s employees could perform tasks such as payroll from home, or any place they have access to a computer and a decent internet connection.
Gartner’s data shows that the cloud business is booming and Cloud companies’ revenues are growing. Digital Realty Trust could profit because cloud companies will have more money to pay for more data center space with. Plus those companies will need more server and data center space which Digital Realty provides.
Growth in DaaS could help Digital Realty because it provides the cloud and data center services that DaaS. For instance, Digital Realty offers secure servers for companies to store data in. An artificial intelligence (AI) company could have its employees perform research in a cloud server based at a Digital Realty facility.
If you are seeking a growing dividend-paying stock that can profit from coronavirus, remote work, and the cloud, the Digital Realty Trust (DLR) is worth investigating. Digital Realty is a REIT that can grow with cloud, even during a coronavirus pandemic.
Originally published at https://marketmadhouse.com on October 12, 2020.
