Digital Realty: Data and Dividends

04/15/2016 8:00 am EST

Focus: REITS

Genia Turanova

Editor, Leeb Income Performance

Income expert Genia Turanova, editor of Leeb Income Performance, reiterates her buy recommendation for this leading US data center REIT, a long-standing holding in her model portfolio.

Digital Realty Trust (DLR) among a select group of REITs to have raised the dividend each and every year since the company’s initial public offering in 2004.

It recently hiked its quarterly dividend by 3.5%, the 11th consecutive annual dividend increase for the REIT.

This also highlights one of the main features of Digital Realty as a company: Its ability to grow as it’s leveraged to the long-term trend of data demand.

The company also announced financial results for the fourth quarter and full year of 2015. While the REIT posted a loss for the fourth quarter, it was mostly due to its acquisition of Telx (which remains on track).

Net income for the full year was $1.56 per share, up from $1 per share in 2014. The company reported core funds from operations — that is, excluding non-recurring items — of  $5.26 for the year, versus $4.96 in 2014.

Core funds from operations, or FFO ex-non-recurring items, were $1.38 per share in the fourth quarter and $5.26 for the year, compared to $1.26 for the fourth quarter of 2014 and $4.96 in 2014 as a whole.

The company also reported $500 million in fourth quarter revenue, up 15 percent from the third quarter and up 21 percent from the same quarter in 2014.

Overall 2015 revenue hit $1.8 billion, up 9 percent from 2014. Its adjusted fourth quarter EBITDA was $288 million, up 156 percent from the third quarter and up 19 percent from the fourth quarter in 2014.

Going forward, Digital Realty Trust is positioned for an acceleration of cash flow growth as its strategic decisions are paying off and the quality of earnings continues to improve.

Additional positives are a fairly strong balance sheet and debt maturity that is relatively far in the future. Yielding 4.3 percent, Digital Realty remains in our portfolio.

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By Genia Turanova, Editor of Leeb Income Performance

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