Digital Realty (DLR) stock is trading around $61.40 near its 52-week low of $59.25. The stock yields 5%. Others in its peer group such as Alexandria Real Estate (ARE) yield 3%, and Vornado Realty (VNO) yield 3.5%.
Positive fundamentals support the 5% yield
The company has a solid balance sheet with $75 million in cash & cash equivalents, and $1.25 billion in borrowing capacity under its global credit agreement. Digital Realty is in compliance with all its covenants.
The tenant portfolio is diversified with the Top 20 tenants contributing to only 47% of the rental income. Except for CenturyLink, which contributes 9.5% to the annual rent, none of the other tenants contribute more than 4%.
Digital realty is a great way to play the growth in cloud computing as the company continues to rent out its space to players in the space. Digital Realty has a portfolio of 110 properties and more than 21 million of rentable square feet.
Total debt maturing in the next 2 years remains a low $482 million. Given the liquidity position of the company, this is not a concern.
Biggest risks related to investing in Digital realty are the deterioration in the credit quality of the tenants, and technology obsolesce, which could drop occupancy rates.
Tool provided by Kapitall.