Technology Sector Ideas

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Digital Realty - >>> 2 High-Yield Tech Stocks to Buy in January

These income-generating companies can make long-term investors a lot richer.


Motley Fool

by Rich Duprey

Dec 30, 2021


https://www.fool.com/investing/2021/12/30/2-high-yield-tech-stocks-to-buy-in-january/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Digital Realty

Real estate investment trust (REIT) Digital Realty (NYSE:DLR) is an unusual choice for a high-yield tech stock because REITs are usually seen as financial stocks, not technology picks. However, because Digital Realty owns and operates warehouses full of servers and data centers, it neatly straddles both worlds.

Data center REITs are also becoming a rare commodity these days because of the merger and acquisition boom in the space. Assuming all the deals that have been announced are completed, Digital Realty and Equinix (NASDAQ:EQIX) will be the last two remaining REITs in the space. With market valuations of $50 billion and $75 billion, respectively, it's unlikely anyone will be acquiring them or taking them private.

Digital Realty owns 282 data centers that represent 35 million square feet of space, including 36 data centers held as investments in unconsolidated joint ventures (Equinix owns 235 data centers).

Data centers essentially serve as the backbone of the internet, providing the nerve center for everything that occurs in the cloud and online, whether it's e-commerce or Internet of Things devices accessing their network. All of that data needs a home in which to live, and data centers provide the warehousing for the servers and networking equipment in a secure environment.

However, data centers are no longer simply a bricks-and-mortar presence -- they have moved into the cloud themselves. Digital Realty's PlatformDIGITAL service is a global data center platform that meets the evolving needs of enterprise customers by allowing them to customize by the cabinet or to scale and hyperscale for very large deployments. It recently closed on a joint venture with Brookfield Infrastructure Partners (NYSE:BIP) to bring the platform to India, one of the world's biggest, most important data center markets.

Third-quarter adjusted funds from operations (AFFO), a critical profitability metric for REITs, was $1.60 per share, up from $1.47 per share a year ago, and was primarily pushed higher by the expansion of the PlatformDIGITAL service.

Digital Realty's dividend currently yields 2.7% annually, which is not especially high compared to AT&T. It is still a hefty payout for a tech stock, and one that investors should count on growing in the future.

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