Data center real estate investment trusts (REITs) provide investors with access to the rapidly expanding sector of data storage and processing.
These REITs focus on owning and managing data centers, facilities that contain the physical infrastructure essential for powering the digital universe. This includes computer systems, servers, and storage components.
Data centers play a crucial role in storing, processing, and managing the continuously growing volumes of digital information and services upon which we depend daily.
Investing in a data center REIT offers exposure to the escalating demand for data storage and processing, fueled by the growth of cloud computing, big data, and digital services.
Data center REITs offer a steady stream of dividend income backed by earnings from leasing space to technology companies, cloud service providers, and other businesses in need of secure and reliable data storage solutions. These leases often extend for multiple years, providing investors with a potentially steady stream of income through dividend payments.
If you’re looking for a way to invest in the growth of the digital economy, data center REITs are a compelling option.
Here are the top REIT investment options for you in the data center space.
Best data center REIT play no. 1: Equinix (EQIX)
Equinix owns, operates, or has an ownership interest in more than 250 data centers worldwide. This extensive network translates into consistent income generation, allowing the company to pay a quarterly dividend of $4.26 per share, currently translating to an approximate 2% yield.
Equinix is not only a data center operator but also a leading provider of internet exchange services, offering customers unparalleled interconnection opportunities. The company’s data centers are situated in key business hubs worldwide, providing optimal connectivity and accessibility for clients.
Equinix is constantly innovating and expanding its offerings to stay ahead of the curve in the ever-evolving data center landscape.
The optimism around Equinix is supported by its strong fundamentals, including record revenue, improving margins, and increasing profitability. Given the projected sustained demand for data centers, Equinix presents itself as a compelling option for investors seeking exposure to this high-growth sector.
Best data center REIT play no. 2: Digital Realty (DLR)
Digital Realty Trust (DLR) stands out as an attractive option for investors looking to gain exposure to the expanding data center market. Owning and operating over 300 data centers globally, DLR leverages its extensive portfolio to generate consistent income through lease agreements. This translates directly to investors through attractive dividend payouts, currently yielding 3.5%.
Data centers are essential infrastructure for many businesses, even during economic downturns. Due to tenants typically being bound by long-term contracts, data center REITs may enjoy more stable cash flows than other sectors during economic downturns.
The demand for data storage and processing shows no signs of slowing down, driven by advancements in cloud computing, the Internet of Things (IoT), and artificial intelligence (AI).
By investing in Digital Realty, investors can gain exposure to this high-growth market without the complexities of directly managing the facilities.
Bottom line
In contrast to many sectors that struggle during economic downturns, data centers are deemed essential infrastructure for businesses. Long-term lease agreements often shield data center REITs from economic fluctuations, offering investors greater stability compared to other real estate investments. Both the data center REITs above offer solid dividends, backed by stable cash flow.
