Digital Realty Trust, Inc. Beats Key Q2 Estimates, Soars to New Heights

Digital Realty Trust, Inc. Up Since March, Bullish on Q2 Earnings BeatDigital Realty Trust, Inc. Hit New 52-Week High, Remains Bullish

Digital Realty Trust, Inc. (NYSE:DLR), one of the largest publicly traded real estate investment trusts (REIT) in the U.S., is where industry giants like Facebook, Inc. (NASDAQ:FB), Verizon Communications Inc. (NYSE:VZ), Oracle Corporation (NYSE:ORCL), and IBM (NYSE:IBM) turn to protect their data.

Home to the leading global data center platform, Digital Realty Trust has been quietly rewarding buy-and-hold investors for years.

Over the last 12 months, DLR stock has advanced 35.5%; year-to-date, it has gone up 34.5%; and since the coronavirus-fueled meltdown in March, it has soared more than 50%.

Digital Realty stock got a recent boost after the company reported strong second-quarter results that topped Wall Street estimates for revenue and the ever-important funds from operations (FFO), a financial performance measure used by REITs that is similar to cash flow per share.

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In addition to the strong second-quarter performance, the company’s outlook remains robust for the second half of 2020 and beyond.

DLR Stock Overview

The San Francisco-based Digital Realty owns, acquires, develops, and operates data centers.

The company also provides data center, colocation, and interconnection solutions to customers in a variety of industries, including cloud and information technology, communications and social networking, consumer products, energy, financial services, healthcare, and manufacturing. (Source: “Digital Realty Reports Second Quarter 2020 Results,” Digital Realty Trust, Inc., July 30, 2020.)

The company currently operates 280 data centers in 21 countries on six continents. (“About Us,” Digital Realty Trust, Inc., last accessed August 3, 2020.)

Where juggernauts like Facebook can rely on Digital Realty to protect their data, investors love Digital Realty stock because it helps protect their wealth. As a REIT, Digital Realty is legally obligated to distribute at least 90% of its taxable income to investors in the form of dividends.

The company has raised its annual dividend for the last 15 consecutive years, at a compound annual growth rate (CAGR) of 11%. DLR stock currently provides an annual dividend of $4.32 per share and a yield of 2.8%. (Source: “Dividend History,” Digital Realty Trust, Inc., last accessed August 3, 2020.)


Chart courtesy of StockCharts.com

Another Strong Quarter of Revenue Growth

On July 30, Digital Realty Trust, Inc. announced that its revenue for the second quarter (ended June 30) increased 24% year-over-year and 21% sequentially to $993.0 million. (Source: Digital Realty, July 30, 2020, op. cit.)

Second-quarter net income came in at $76.0 million, or $0.20 per diluted share. In the second quarter of 2019, Digital Realty had earnings per diluted share of $0.15. In the first quarter of 2020, it had earnings per diluted share of $0.90.

The company announced second-quarter adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $559.0 million, a year-over-year increase of 17% and sequential increase of 16%.

Second-quarter FFO was $415.0 million, or $1.49 per share, versus $1.53 per share in the same period last year and $0.91 per share in the previous quarter. Core FFO was $1.54 per share in the second quarter, compared to $1.64 in the same prior-year period and $1.53 per share in the first quarter of 2020.

Digital Realty ended the second quarter with cash and cash equivalents of $505.2 million, up from $33.5 million in the same period a year ago and $246.5 million at the end of the prior quarter.

Digital Realty Trust, Inc. has total debt of about $12.4 billion.

A. William Stein, CEO commented,  “We continued to seed investments to support our customers’ future growth across the Americas, APAC and EMEA, while delivering record current-period bookings, demonstrating the power of our global platform as well as the resiliency of our business.”

Stein added, “Looking ahead, we are well positioned to continue to deliver sustainable growth for customers, shareholders and employees, into the second half of 2020 and beyond.” (Source: Ibid.)

Analyst Take

Digital Realty stock could be the perfect tech stock for the growing Internet, digital economy, and mobile workforce.

While more and more businesses are turning to the cloud, the global adoption rate is still less than 20%. Over the coming years, businesses that already have a massive global footprint in the cloud sector, like Digital Realty Trust, Inc., will be the ones best positioned to take advantage of the growing demand for cloud data centers.