Highest Real Estate Dividend Stocks in Passive Income Decade

When trying to achieve financial independence, one of the best things you can do is build a passive income stream. Dividend stocks are one source of passive income.

As a dividend investor, you want to invest in companies that do two things. One is to pay an attractive dividend yield. And the second is that we want companies with stable earnings to pay stable and predictable dividends.

A person reviewing a laptop in a data center.

Image Source: Getty Images.

These qualities can be found in real estate investment trusts (REITs). These companies pool the investor’s capital and give ordinary investors the opportunity to invest in real estate and earn a portion of the profits. These stocks are very attractive to income investors because a REIT must pay his shareholders 90% of his taxable income as dividends.

Digital Realty Trust (DLR 0.59%) It is one of the REITs that can provide stable dividends over the next 10 years.

REITs in fast-growing industries

Every time you upload a photo or video or access your music, you have to store the data you use somewhere. That’s where Digital Realty Trust comes in. The REIT provides companies with data center space to securely store their digital data in the cloud, and with 300 data facilities in 25 countries, he is one of the top data center providers in the world.

Digital Realty is well positioned in a rapidly growing industry. The company benefits from the rise of technologies such as the Internet of Things, self-driving cars and artificial intelligence. All of these generate huge amounts of data that need to be stored somewhere.

Over the past decade, Digital Realty’s working capital, a key metric used to evaluate REITs, has grown by nearly 20% compounded annually. As a result, the company’s dividend has been steadily increasing, increasing by 67% over the past decade, or about 5% compounded annually. Digital Realty’s growth also allowed us to increase our dividend for the 17th consecutive year. This is the perfect sign if you are looking for a steady income.

A chart showing Digital Realty's funds under management and dividends have risen since 2014, while its dividend yield has fallen slightly.

DLR Funds from Operations (TTM) data by YCharts

Why One Famous Shortseller Targets Equities

Digital Realty has come under pressure in recent months as short seller Jim Chanos targets traditional data center operators.Shanos said financial times How legacy data centers face threats Amazon, Google, OracleWhen microsoft, We are a large customer, but we are building our own data center.

Digital Realty CEO Bill Stein disputed this, telling CNBC that “demand has never been stronger in our space,” adding that the company has “received record bookings in the last two quarters. I did,” he said.

Tech giants are building their own data centers, but most companies cannot develop and manage these high-cost facilities, so they rely on incumbent providers. Data center demand continues to be strong, with Digital Realty posting record bookings for services in Q1 and Q2, and demand is strong. The company has 44 expansion projects in its 28 metropolitan areas and has pre-sold 58% of its capacity. This is evidence of strong demand for data centers.

Not only that, data centers serve specific geographies to reduce latency or speed up data transfer. Digital Realty has an advantage, with 291 data centers spread across 50 major metropolitan areas around the world.

Digital Realty looks to new markets to drive growth

Digital Realty’s stock has taken a hit this year. It’s down nearly 32% year-to-date. Despite business concerns, including inflationary pressures and rising interest rates that could make borrowing more difficult, the data center industry is still poised for solid growth.

According to market research and consulting firm Grand View Research, the global data center market size is expected to grow at a CAGR of 13% through 2028, providing a great opportunity for Digital Realty to continue expanding its business. increase. Digital Realty is expanding its business to include Africa and the Middle East, expanding its existing footprint into underserved regions of the world.

With the explosion of data and its importance in our daily lives, Digital Realty is well positioned to continue growing and profitably. This will be an excellent source of passive income for his next decade and beyond.

JPMorgan Chase is an advertising partner for The Motley Fool’s Ascent. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Courtney Carlsen has positions at Alphabet (C shares) and her Microsoft. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Digital Realty Trust, Jefferies Financial Group and Microsoft. The Motley Fool’s U.S. headquarters has a disclosure policy.

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