It's Not Worth Investing In Digital Realty Trust For The Dividends (Downgrade)

Summary

• Digital Realty's stock is overvalued based on both a dividend discount model and price multiples.
• The potential need to refinance a significant amount of debt in the near future creates uncertainty due to elevated interest rates.
• The recent earnings release combined with the proposed equity raise, while keeping the dividend flat, is also not really appealing for us.
• As a result, the recommendation for Digital Realty's stock is downgraded from hold to sell.

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Digital Realty (NYSE:DLR) brings companies and data together by delivering the full spectrum of data center, colocation, and interconnection solutions. We have started coverage of DLR back in August 2023, with an initial neutral rating. Our first article, titled the

Analyst’s Disclosure:I/we have a beneficial long position in the shares of DLR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Past performance is not an indicator of future performance. This post is illustrative and educational and is not a specific offer of products or services or financial advice. Information in this article is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. This article has been co-authored by Mark Lakos.