Wednesday, April 30, 2014

Recent Buy: DLR

Apr 25, 2014: Bought 48 shares of DLR at $52.73 per share.

Digital Realty (DLR) is one of the 20 largest publicly-traded U.S. Real Estate Investment Trusts (REITs) with an equity market capitalization of approximately $7 billion. The company, through its controlling interest in Digital Realty Trust, L.P. and subsidiaries of the Operating Partnership, owns, acquires, repositions and manages technology-related real estate.

DLR is a Dividend Contender with a 10-year streak of dividend increases. It pays quarterly dividends in March, June, September and December. The current dividend is 83¢ per share, so starting yield on cost is 6.30%.

Over the past 10 years, DLR's share price performance has been quite impressive, increasing 341% compared with 71% by the S&P 500. DLR's share price has had only 2 down years, in 2008 and 2013. The most recent decline provides a great investment opportunity.


Analysis of DLR


My fair value estimate for DLR is $56.10, so I picked up shares at a discount of about 6%. The following table provides some key statistics for DLR, with highlighted values relating directly to my selection criteria.


DLR meets the requirements of the Chowder Dividend Rule, which requires that the sum of a stock's dividend yield and its 5-year dividend growth rate exceeds 12%. For MDP, the sum is 26.52%.

DLR earns 5 stars: (*******)

Other ratings for DLR


 Zacks Rating  3 Hold
 Thomson Reuters StockReport+   (7/10)Neutral 
 The Motley Fool's CAPS Rating  (*****)

Concluding Remarks


DLR is my first REIT holding in DivGro and increases my exposure in the Financials sector to six holdings.

48 shares of DLR adds $159.36 of expected dividend income, increasing DivGro's projected annual dividend income to $3,667.79.

DLR is the 28th holding in DivGro.

This post is a little thin on detail – I'll add more detail soon and elaborate on why I like DLR at this price... Nevertheless, feel free to comment below on DLR. Do you own shares of DLR?

10 comments :

  1. Hi
    Nice purchase. I'm long DLR

    Regards DH

    ReplyDelete
    Replies
    1. Thanks for stopping by, DH -- yes, I like DLR here and its been receiving some good coverage lately.

      Delete
  2. Interesting move, DivGro. I looked at it a while ago and passed on investing in it although I liked a lot in the REIT. I am already quite overweight in REIT currently, so I will have to circle back to it later after rebalancing with other sectors.

    regards
    R2R

    ReplyDelete
    Replies
    1. Hi R2R -- DLR is my first REIT buy in DivGro and I like it, of course, for the excellent dividend yield and dividend growth rate. It is a bit expensive to my liking, but the pros outweighs the cons, in my mind.

      Thanks for stopping by!

      Delete
  3. Ferdi,

    I'm long DLR, so I'm biased. However, I think there's a lot to like here with DLR. The yield and dividend increases are certainly wonderful. Risks are certainly there as it remains to be seen how data storage and cloud usage changes over the next 10-20 years, but in the end they still own physical real estate in highly desirable areas.

    Best wishes!

    ReplyDelete
    Replies
    1. Hi Jason -- thanks for your comment. Personally, I'm not too concerned about the future of data storage and cloud usage. In my line of business, the trend is up-up-up and my kids are now doing their papers, presentations, and homework "in the cloud" using free beta software. Still, your last sentence is an astute observation for DLR, and yet another reason why I like it.

      Take care!

      Delete
  4. Nice pick up. I also have my eye on DLR and think it is fairly valued at the moment. I particularly love the attractive yield above 6% and the nice 10 year history of dividend increases.

    ReplyDelete
    Replies
    1. Indeed, 6% and a 10 year history are hard numbers to beat! Adding nearly $160 to projected annual dividend income is another plus...

      Thanks for stopping by and take care!

      Delete
  5. DLR wouldn't be my first choice for a REIT investment. I am more comfortable investing in healthcare REITS instead for the longer term because of the graying of America. That's a theme that will play out over the next few decades. Digital assets are only getting smaller and more efficient thus reducing the need for additional data centers long term. I know we still need server farms etc. to store all the FB updates and tweets and photos we share but the computing/storage power will shrink per square foot thus requiring less digital real estate. Just my two cents for the long term approach.

    ReplyDelete
    Replies
    1. Thanks for your perspective, DivHut. I have only 2 healthcare REITs on my watch list, NHI and OHI. Of those, OHI looks most interesting. Do you have other REITs in mind?

      As far as digital real estate is concerned, I think the appetite for data storage and increased computing power will outpace the improvements in computer storage and processing efficiency.

      Delete

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