Digital Realty Operates Data Centers For Big Companies


The rise of cloud computing is making data centers more important to big companies, andDigital Realty Trust ( DLR ) likes to think it's the go-to company for that.

Digital Realty is a real estate investment trust that specializes in owning and operating data centers. It operated 131 properties with 24.5 million square feet as of March 31.

It has 1.3 million square feet under development and 1.4 million square feet held for future development.

Many data centers resemble two-story or taller office buildings, but are filled with densely packed servers and cables rather than workers.

Among its clients areARM Holdings ( ARMH ), the British chipmaker whose products are found in 95% of the world's smartphones. Digital Realty already had a data center near ARM's headquarters in Cambridge, but the U.K. company needed a big U.S. presence. Digital Realty arranged for it to take over part of an Austin, Texas, data center.

In 2011,NetApp ( NTAP ) held competitive bidding that was won by Digital Realty, which built for the company a customized data center in Hillsboro, Ore.

The center saves money by using Oregon's cool climate to keep its servers from overheating.

Funds from operation, the REIT equivalent of earnings, have been growing steadily for years, from $1.38 per share in 2005 to $4.79 in 2013. Analysts expect 1% growth in 2014 and 7% growth in 2015.

Quarterly revenue growth has been on the decline. From double-digit growth over the past few years, the company has had two quarters of single-digit revenue growth of 9%.

Earlier this year, Digital Realty raised its quarterly dividend to 83 cents a share from 78 cents. That's up from 15.6315 cents in 2004.

The current dividend works out to a 5.8% annualized rate. Digital Realty has data centers in the U.S., Europe, Asia and Australia.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas

Referenced Stocks: DLR , ARMH , NTAP

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