Dividend-Paying Data Center REITs Have Huge First Quarter: 4 to Buy Now

Investing

Published: May 11, 2016 10:25 am

Last Updated: January 13, 2020 9:33 am

Generally when investors think of real estate investment trusts (REITs), the first thought is companies that own office buildings, malls and shopping centers. But the data center REITs are growing like crazy, and with the numbers in it looks like they had an outstanding first quarter. If one top Wall Street firm is right, we are just in the early innings of what could be a long and very prosperous ball game.

A new research report from Jefferies examined the first-quarter results from the companies in their data center research universe and came away very bullish, noting that leasing volumes for the quarter reached new records. In fact, the companies in the Jefferies universe leased $155 million of annualized revenue, which the report says is 75% above the prior two-year average.

With growth expected to continue almost unabated, four companies are rated Buy.

CoreSite Realty

This is the second favorite data center pick at Jefferies, and the analysts forecast 20% adjusted funds from operations growth over the next three years, which is the highest in the group. CoreSite Realty Corp. (NYSE: COR) delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 900 of the world’s leading enterprises, network operators, cloud providers and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads.

CoreSite’s scalable, flexible solutions and more than 350 dedicated employees consistently deliver unmatched data center options, all of which leads to a best-in-class customer experience and lasting relationships.

CoreSite investors are paid a 2.77% distribution. Jefferies raised price target on the stock to $91, and the Thomson/First Call consensus target is listed at $76.25. The stock closed most recently at $76.63 per share.