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Digital Realty Trust (DLR) Joining S&P 500: Stock to Gain?

Digital Realty Trust Inc. DLR is set to join the S&P 500 following the close of trading on Tuesday, May 17. This data center real estate investment trust (REIT) will replace Time Warner Cable Inc. TWC which is about to be acquired by Charter Communications Inc. CHTR in a transaction that is expected to be accomplished on or about that date.

Headquartered in San Francisco, CA, Digital Realty will be particularly added to the S&P 500 GICS (Global Industry Classification Standard) Specialized REITs Sub-Industry index. The company owns, acquires, repositions and manages the technology-related real estate. Specifically, it provides data center, colocation and interconnection solutions that are critical for the day-to-day operations of the technology industry tenants.

Digital Realty has large-scale operations, supporting the data center and colocation strategies of more than 1,000 firms from its data centers situated in North America, Europe, Asia and Australia. Its boasts a strong client base of different sizes and from varied industries, ranging from financial services, cloud and information technology services, to manufacturing, energy, gaming, life sciences and consumer products.

Importantly, amid growth in cloud computing, Internet of Things, big data, and the number of companies opting for third party IT infrastructure, data center REITs are gaining ground and experiencing a boom market. Digital Realty is efficiently capitalizing on this thriving market.

The company came up with core FFO per share of $1.42 in first-quarter 2016, beating the Zacks Consensus Estimate of $1.34 and increasing from $1.27 in the year-ago quarter. Moreover, it has a decent history of surprises, having surpassed estimates in three out of the trailing four quarters, with an average beat of 3.65%.

Digital Realty currently has a Zacks Rank #2 (Buy). Also, it has an expected EPS growth rate of 7.3% for 3–5 years, which is ahead of the industry average of 6.1% and makes the stock worth adding to one’s portfolio.

Investors interested in the REIT industry may also consider another stock – CoreSite Realty Corporation COR – that carries the same Zacks Rank as Digital Realty.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All earnings per share numbers presented in this write up represent FFO per share.

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TIME WARNER CAB (TWC): Free Stock Analysis Report
 
DIGITAL RLTY TR (DLR): Free Stock Analysis Report
 
CHARTER COMM-A (CHTR): Free Stock Analysis Report
 
CORESITE REALTY (COR): Free Stock Analysis Report
 
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