Growth and Dividend rarely come together in one stock. Many companies often have to sacrifice one for the other. But who says you can’t eat your cake and have it with both growth and dividend on Digital Realty Trust, Inc (NYSE: DLR)
Source: Brett Sayles
When you hear the internet, the cloud, or anything digital, you probably don’t think of a physical structure, do you? But all the data that are carried through these metaphysical platforms don’t materialize from thin air. These data are stored in physical buildings called data centers. And Digital Realty Trust is a Real Estate Investment Trust (REIT) that owns about 300 of those in North and South America, Europe, Africa, and Asia.
There are some notable things about this stock, starting from its dividend. Being a REIT, Digital Realty is required to fill the pockets of its stockholders with a substantial part of its earnings. The data center provider has a dividend yield of 3.23% and a payout ratio at 76%, which is just enough to maintain a stable dividend payout while still having enough to re-invest in the business. And this brings us to the company’s stock growth.
If you invested $10,000 in Digital Realty at its IPO in 2005, you would have well over $100,000 today in total returns without counting dividends. All these from a stock whose main method of making paying its shareholders is through dividend payouts as a REIT.
A quick dive into the company’s Q3, FY2021 reports reveal that the company increased its funds from operations available to stockholders by 54% to $505 million.
Future growth opportunities for Digital Realty are also clear to see. The company announced that it has agreed to buy Teracco, the biggest data center operator in Africa. Recently, Africa has gradually become a battlefield for data center operators, as the continent goes though its digital transformation. And this talk of acquisition is great to help Digital Realty stay ahead of competition and the market.
Technical Analysis
There is a support trendline the underlines the stock on a slightly sloped uptrend. What this means is that DLR is not growing too fast, and it’s taking its time to make regular corrections, which is a good thing for long term investors.
What makes this support trendline, and every other trendline, an interesting price action tool when analyzing the stock market is the tendency of the price to get repelled on contact with these lines. And now, the DLR stock has collided with this trendline.
The point of collision of the price with the trendline happens to fall right in the middle of the $127 – $131 and $163 – $167 support and resistance levels, respectively. And on a closer look (you’ll see this better on the daily chart), you will notice that a level has existed at this mid point.
All these make the currenct position of DLR quite interesting. If the stock behaves as it has in the past, we might see an upside of at least 21% as the price breaks the $163 – $167 resistance level to create a higher high above its all-time high of $178. This would make Digital Realty Trust a good dividend stock but also a fair growth stock for the long term.
