Digital Realty Trust, Inc.
) has increased its dividend 10 times since its initial public
offering in the fourth quarter of 2004, and currently pays a
regular quarterly dividend that yields 4.1% annually. Furthermore,
this Zacks Rank #2 (Buy) REIT reported impressive third-quarter
results in October, leading to positive FFO (funds from operations)
estimate revisions for 2012.
With its dividend return and an expected long-term FFO growth rate
of around 8.1%, Digital Realty appears to be a promising pick for
investors seeking both growth and income.
Impressive Earnings Story
Digital Realty is scheduled to release its fourth-quarter 2012
results on Feb 15. The Zacks Consensus Estimate is currently pegged
at $1.16 per share.
On Oct 26, the company reported strong third-quarter FFO per share
of $1.13, topping the Zacks Consensus Estimate by 15.3% and the
year-ago FFO by 11.9%. The better-than-expected performance was
primarily driven by increased revenues.
With an impressive global presence and a solid balance sheet, as
well as an expertise in acquisition and development activity, the
company remains well poised for augmenting its top line in the
Total operating revenues increased 25.2% year over year to $342.5
million. Operating Income advanced 35.5% year over year to $97.1
With strong results in the third quarter, Digital Realty now
expects FFO per share between $4.40 and $4.44 for 2012, reflecting
an expected growth of 8.4% to 9.4% year over year.
FFO Estimates Moving Higher
The Zacks Consensus Estimate for 2012 advanced 0.2% to $4.41 in the
past 60 days, suggesting year-over-year growth of around 8.6%.
Moreover, the Zacks Consensus Estimate for 2013 is currently $4.97,
representing year-over-year growth of about 12.7%.
Digital Realty has been paying dividends regularly and hiked its
quarterly dividend rate by 7.4% to 73 cents per share in the first
quarter of 2012. Based on this rate, the annual yield comes to
Shares of Digital Realty currently trade at 14.4x 12-month forward
earnings, a 3.4% discount to the peer group average of 14.9x. Its
price to book ratio of 3.0 is at a 57.9% premium to the peer group
average. Given its strong fundamentals, the premium valuation is
Moreover, the company has a trailing 12-month ROE of 8.4%, compared
with the peer group average of 3.0%. This implies that the company
reinvests its earnings more efficiently than its peer group.
Headquartered in San Francisco, California, Digital Realty Trust,
Inc. is a real estate investment trust and the sole general partner
of Digital Realty Trust, L.P. The company owns, acquires, develops,
redevelops and manages technology-related real estate. With a
market cap of about $8.8 billion, this REIT has a global presence
and its portfolio is located in 32 markets throughout Europe, North
America, Asia and Australia. AmREIT, Inc. (
), Post Properties Inc. (
) and Redwood Trust, Inc. (
) are the other Zacks Rank #1 (Strong Buy) stocks in the same
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