Digital Realty Trust Inc.
) announced a 7% hike in its quarterly cash dividend rate, based
on its bullish expectations of persistent growth in funds from
operations. The company will now pay a dividend of 78 cents per
share, a nickel above the prior-quarter dividend of 73 cents per
share. The increased dividend will be paid on Mar 29, 2013 to
stockholders of record on Mar 15.
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Digital Realty has established an impressive track record of
conservative capital management and cash returns to shareholders
in the form of steady dividend. The current hike reflects the
eleventh dividend increase since its IPO in the fourth quarter of
Based on the current dividend rate, the annual dividend rate
comes to $3.12 per share, a 6.8% hike from the 2012 annual
dividend of $2.92 per share. Moreover, it reflects a compounded
annual growth rate of 15.3% since Digital Realty's first full
quarter of operations following its IPO in 2005.
Digital Realty operates data centers and digital storage
facilities, which are primarily used by telecommunication
companies to maintain their presence on the Internet or augment
their data networks. Data centers usually incur high costs for
building and maintenance, and as such the supply is relatively
Moreover, with the rise in the demand for digital storage
facilities in recent years, Digital Realty has benefited greatly
by negotiating favorable lease terms and maintaining strong
occupancy rates. The long-term lease agreements have also
insulated the company from short-term volatility and unfavorable
market swing experienced during the recession. Therefore, the
company is well poised to maintain its growth curves and
simultaneously benefit the shareholders with steadily rising
In addition to Digital Realty, many other REITs have raised their
Simon Property Group Inc.
) raised its dividend by 4.5% sequentially,
AvalonBay Communities Inc.
) hiked its dividend by 10.3% and
BRE Properties Inc.
) declared a 2.6% sequential hike in its quarterly cash dividend.
As a matter of fact, solid dividend payouts are arguably the
biggest attraction for REIT investors as the U.S. law requires
these companies to distribute 90% of their annual taxable income
in the form of dividends to the shareholders.
Digital Realty is scheduled to release its fourth-quarter 2012
results on Feb 15, 2013, prior to the opening bell. The Zacks
Consensus Estimate for the company's fourth-quarter FFO (funds
from operations) is currently pegged at $1.16 per share. The
company currently has a Zacks Rank #4 (Sell).