Infrastructure

3 Data Center and 3 Medical REITs With Massive Total Return Potential

Medical Properties Trust

This company may be offering investors the best value at current price levels. Medical Properties Trust Inc. (NYSE: MPW) acquires, develops and invests in health care facilities and leases health care facilities to health care operating companies and providers. The company also provides mortgage loans to health care operators, as well as working capital and other term loans to its tenants/borrowers.


With a growing portfolio and a versatile business model, the company continues to rank high across Wall Street. The analysts noted that the company’s acute care hospitals rent coverage increased nicely and the company attributed the increase to better cost controls and higher patient admissions.

Investors receive a 5.68% distribution. The $22 Jefferies price target is well above the $13.58 consensus target. The shares closed at $19.01.

CyrusOne

This is a top pick among the data center stocks. CyrusOne Inc. (NASDAQ: CONE) designs, builds and operates facilities across the United States, Europe and Asia that give its customers the flexibility and scale to match their specific growth needs. Specializing in highly reliable enterprise-class, carrier-neutral data center properties, the company provides robust data center infrastructure to ensure the continued operation of IT equipment for a rapidly growing list of organizations that now nears 900, including nine of the Fortune 20 and more than 160 of the Fortune 1000 or equivalent-sized companies.

Many analysts feel that some of the best returns in the data center group may be found in the smaller players in the space like CyrusOne. The company trades at numerous lower multiples than their bigger competition, and top analysts feel that the discount valuation is not warranted given the recent surge in leasing and above-average growth. The company also has exhibited faster deployment times, rapid new market expansion and low churn among customers, all bullish reasons for buying the stock.

Unitholders receive a 2.54% distribution. Jefferies has set an $80 price objective, which is in line with the $79.94 consensus target. The shares closed at $78.84 on Thursday.

Digital Realty Trust

This top data center stock is a solid play on the huge cloud and streaming content revolution. Digital Realty Trust Inc. (NYSE: DLR) supports the data center and colocation strategies of more than 600 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Asia and Australia.

Digital Realty’s clients include domestic and international companies of all sizes, ranging from financial services and cloud and information technology services to manufacturing, energy, gaming, life sciences and consumer products. The company rates highest with portfolio managers, as 8.39% of the market cap of the company is in institutional hands.

Top analysts cite the solid dividend and the potential for dividend growth. Many also feel that data center pricing is still favorable and the growth in adoption of the cloud is a huge positive going forward. Lastly, some on Wall Street feel the stock is underweighted by active managers and could see an uptick if they started adding shares in 2020.

Investors receive a 3.07% distribution. The massive $186 Jefferies price target compares with a $149.95 consensus target and the most recent close at $145.79.

QTS Realty Trust

This is another top pick data center REIT, and it has been rumored to be a takeover target. QTS Realty Trust Inc. (NYSE: QTS) is a leading provider of secure, compliant data center solutions, hybrid cloud and fully managed services. Its integrated technology service platform of custom data center colocation and cloud and managed services provide flexible, scalable, secure IT solutions for web and IT applications.

Its Critical Facilities Management provides increased efficiency and greater performance for third-party data center owners and operators. QTS owns, operates or manages 24 data centers and supports more than 1,000 customers in North America, Europe and the Asia Pacific.

Investors are paid a 2.81% distribution. The Jefferies price target is $75. The consensus target is $71.60, and shares closed at $68.48.


Six top companies that all have solid total return potential and, perhaps best of all, offer a degree of safety going forward. The market is extremely overbought, and when it backs up to consolidate the gains over the past four months, the move could be dramatic.

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