Five Data Center Stocks to Purchase for Dividends and Profits

Five data center stocks to purchase for dividends and profits allow investors to tap into collation services providers that fit into the information technology (IT) world.

The five data center stocks to purchase for dividends are poised to “outperform” the market, according to ISI Evercore, an investment firm that has begun to cover the industry. ISI Evercore’s coverage will feature U.S.-headquartered colocation services providers, with the industry amassing a total available market of roughly $37 billion, fueled by a compound annual growth rate (CAGR) of 7%.

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Given the foundational, but often underappreciated role of multi-tenant data centers as part of the hybrid IT world, ISI Evercore sees a fertile field for investors. The combination of “exponential data creation,” traffic growth and digital transformation initiatives across enterprise, cloud, service providers, public sector and demand for optimized IT performance should drive sector growth, ISI Evercore wrote in its research note.

Five Data Center Stocks to Purchase for Dividends Through REITs

Plus, the real estate investment trust (REIT) structure makes data center stocks an asset class that should appeal to a broad range of investors, according to ISI Evercore. Despite concerns about the threat of public cloud and commoditization of data center services, ISI Evercore forecasts hyperscale growth for the industry.

“In addition, there are opportunities for companies to differentiate via interconnection and adjacent offerings such as managed services,” ISI Evercore wrote. Within this industry, we favor companies that have global scale and the ability to attach value-added services.”

Equinix Is One of Five Data Center Stocks to Purchase for Dividends

Equinix (NASDAQ: EQIX), of Redwood City, California, is a Silicon Valley, multi-tenant data center provider that allows competing networks to connect and share data traffic securely. The name Equinix was chosen to reflect the company’s focus on equality, neutrality and internet exchange.

ISI Evercore ranked Equinix as one of five data center stocks for dividends and profits that the investment firm expects to beat the market. Equinix nabbed a target price of $950 from ISI Evercore.

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Five Data Center Stocks to Purchase for Dividends: Digital Realty Trust 

San Francisco’s Digital Realty Trust, Inc. (NYSE: DLR) supports data center, colocation and interconnection strategies of customers worldwide, ranging from cloud and information technology services, communications and social networking. Its clientele also features financial services, manufacturing, energy, health care and consumer markets.

ISI Evercore gave Digital Realty Trust, Inc. (DLR) an outperform rating and a target price of $180.

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CyrusOne Rates with Five Data Center Stocks to Purchase for Dividends 

Dallas-based CyrusOne, Inc. (NASDAQ: CONE) has a vast portfolio that includes more than 40 enterprise-class facilities across three continents, and more than 4 million square feet of total net rentable square footage. Recent developments at CONE could create near-term catalysts for the stock, ISI Evercore wrote.

Customers lower short and long-term capital and operating costs by designing customized data center solutions tailored to a company’s current and future IT needs. The customers further can reallocate precious IT resources back to driving innovation and growth for their core business.

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ISI Evercore wrote positively about the recent return of David Ferdman, CONE’s co-founder, as the company’s chief executive officer, meriting an “attractive valuation” that creates a “tactical buying opportunity” in the stock. The investment bank gave the stock an “outperform” rating and a target price of $100 per share.

CoreSite Realty Joins Five Data Center Stocks to Purchase for Dividends

ISI Evercore added Denver’s CoreSite Realty Corporation (COR) as a fourth data center stock that it included in its new coverage but rated it as an “in line” prospect, not one of the sector’s three stocks that it predicts will “outperform” the market. CoreSite Realty appears “fairly valued” at current levels with a target price of $154, the investment firm wrote. However, CoreSite offers a 3.3% dividend yield that gives the stock extra appeal to dividend investors.

The company uses a cloud, interconnection and colocation platform to design, plan and implement its hybrid, multi-cloud IT solution. With CoreSite, businesses can attain cost-effective growth within network-dense edge markets.

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Growth drivers for the sector include data increases and creation; demand for digital transformation through enhanced IT infrastructures, flexibility and scalability modularity; migration toward a hybrid IT architecture; and adoption of distributed IT architectures becoming the norm, ISI Evercore wrote. In addition, vendors can differentiate their offerings with innovation via value-add services to achieve higher pricing and lower commoditization risk.

Also expect the public cloud to be a net positive for the colocation industry, ISI Evercore continued. Scale will matter as colocation companies with a global presence benefit from their increased geographic flexibility amid continued industry consolidation.

Alternative Exists to Five Data Center Stocks to Purchase for Dividends

“Data centers and cell towers have been a focus of my preferred REIT mutual fund, Cohen & Steers Realty Shares (CSRSX), for a number of years,” said Bob Carlson, who heads the Retirement Watch investment newsletter. “They’ve been among the top sectors in the fund for some time and appear likely to remain so.”

Cohen & Steers identifies these sectors with others that will benefit from major changes likely to persist for some time, continued Carlson, who serves as chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. The sectors benefit from rising use of technology, especially for mobile purposes, he added.

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“Data centers benefit from the move of data and computing activities to the cloud instead of servers and hard drives residing at a business or home,” Carlson said.

The top holdings in these sectors for Cohen & Steers recently were American Tower Corporation (NYSE: AMT), Equinix, CyrusOne, Digital Realty Trust, Crown Castle International (NYSE: CCI) and SBA Communications (NASDAQ: SBAC). Investors who want to use a leverage to benefit from these and other REITs can invest in the closed-end fund, Quality Income Realty (RQI). It has a leverage ratio of about 24% and a recent distribution rate of 7.42%, Carlson added.

Retirement Watch chief Bob Carlson answers questions from Paul Dykewicz.

Five Data Center Stocks to Purchase for Dividends Add American Tower

Jim Woods, who leads the Intelligence Report and Successful Investing newsletters, as well as the Bullseye Stock Trader advisory service, recommends American Tower. Woods described the company as a “buy” for subscribers to his Intelligence Report newsletter.

The stock is not a traditional data center company but it offers telecommunication infrastructure that allows mobile phone users to search for and obtain information while they are on the go. For investors who want to profit from the growing trend toward data use, American Tower provides an additional investment opportunity.

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As an Income Multiplier pick, Boston-based American Tower has produced an average return of 16% during the past five years. The company is a real estate investment trust and an owner and operator of wireless and broadcast communications infrastructure in several countries worldwide.

Paul Dykewicz meets with stock picker Jim Woods, editor of Intelligence Report.

Five Data Center Stocks to Purchase for Dividends Grow Despite COVID

COVID-19’s highly transmissible Delta variant has become less deadly lately with a reduced number of cases and fatalities in the United States but it remains a big concern for public health experts who keep urging increased vaccinations and booster shots, as well as mask wearing. The Centers for Disease Control and Prevention (CDC) specifically has blamed the variant for triggering a resurgence of cases and deaths earlier in the fall.

However, the threat is spurring a rise in the number of people vaccinated from COVID-19. As of Nov. 5, 222,902,939 people, or 67.1% of the U.S. population, have received at least one dose of a COVID-19 vaccine, the CDC reported. The fully vaccinated total 193,425,862 people, or 58.3%, of the U.S. population, according to the CDC.

COVID-19 deaths worldwide, as of Nov. 5, surpassed the 5 million mark by reaching 5,037,148, according to Johns Hopkins University. Worldwide COVID-19 cases totaled 249,057,148, as of that date.

U.S. COVID-19 cases, as of Nov. 5, reached 46,424,240 and caused 753,738 deaths. America has the dreaded distinction as the nation with the most COVID-19 cases and deaths.

The five data center stocks to purchase for dividends and profits allow investors to ride a worldwide technology wave to keep growing their assets amid the pandemic.