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Data Centers: A New Breed of REITs
07/05/2016 8:32 am EST
This recommended stock would rank pretty high on a list of the worst names for companies; at the same time, it is always near the top of my list for best buys for long-term income investing, states Briton Ryle, editor of The Wealth Advisory.
Communication Sales & Leasing (CSAL) is about as good as it gets. CSAL is one of a new breed of real estate investment trusts that own Internet infrastructure (fiber, cell towers, etc) and lease it to customers.
The exponential growth of Internet traffic — especially mobile Internet traffic — makes these Internet REITs very attractive long-term investments.
The data-center and Internet infrastructure REIT trend is just beginning. Internet traffic is only going to go up, and mobile Internet traffic is just getting started.
If you haven't invested in this long-term trend, you should – as soon as possible. And CSAL is the way to do it.
CSAL is a relatively new company. It was spun off from Windstream (WIN) in April 2015 at around $30 a share; originally, CSAL's only source of revenue was leases with Windstream.
And that's why the stock did not do well right out of the gate. Investors were worried that CSAL had all its eggs in the Windstream basket.
We thought differently. With a solid portfolio of fiber, cell towers, and a small but growing percentage of data center, is it realistic to think that CSAL would never sign up new customers? Of course not.
But this shows how you can always find opportunity if you take a deep look into companies that others are dismissing.
Although the stock is up around 65% since we bought during the February correction, there's still a lot of upside.
Just in the last three months, earnings per share estimates for the current fiscal year have jumped 40% — from $1.82 a share to $2.58. And because CSAL is a REIT, at least 90% of profits will be paid to you, the shareholder.
I can't tell you the stock will be up tomorrow. But a year from now, it will be higher. I expect that this time next year, CSAL is going to be trading over $40 a share, and that dividend will be bigger, too.
Put the shares in a Roth IRA if you can. You can also buy through a direct purchase plan that will save you some commissions. They also have a dividend reinvestment plan, so you can get more shares in lieu of the dividend payment.
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By Briton Ryle, Editor of The Wealth Advisory
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