EQIX - Investors Are Loving This Massive Data Center REIT
Given the industry demand, it's no surprise why investors continue to flock to data center stocks. In this clip from "Real Talk" on Motley Fool Live , recorded on March 25 , Motley Fool contributors Matthew DiLallo and Matt Frankel discuss their favorite data center stocks, and share which companies they think could scale the most over the next decade and which might be a future dividend aristocrat.
Matthew DiLallo: If Switch (NYSE: SWCH) wasn't looking at strategic alternatives, that would probably be my favorite one because it has everything we look for in a Motley Fool pick, like founder-led. He's really engaged in the business. It's all about building better data centers and so much growth. They own five campuses around the country, that's 16 data centers, and they have about five million square feet of capacity, but they have enough space in their campuses to bill up to 16 million square feet of space. You're talking about a company that could really scale in the next decade. I think it's a decade-long thing. Whoever buys that, I think, is going to get a great long-term growth company. I really do think they're going to get bought out because there's just so much money flowing into the sector. Because of that, Digital Realty (NYSE: DLR) is really starting to show up for me as being a really good deal these days. It's down about 20% from its high and this is just such a fantastic company. They've grown their FFL per share at a double-digit rate since 2005, so it's very consistent. They've increased their dividend every year for 17 years. They're much more of a real estate play even than Equinix (NASDAQ: EQIX) , and that's one of the reasons they have a higher dividend yield. They really want to be more the traditional REIT. They have a higher payout ratio, but still a good balance sheet. They're able to grow both through acquisitions. They can leverage their balance sheet and basically buy whatever they want. And development, they have a good land bake and they're just continuing to expand in the right places. I think at their current price, I believe it's 20 times FFO, which is really cheap for what data centers have been going at. We saw a lot of these getting taken out at 25 times plus. You've got a great company trading at a relatively inexpensive price. Dividend yield's over 3.5%. It's looking really attractive to me.
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Investors Are Loving This Massive Data Center REIT