Digital Realty Trust, Inc. (DLR). Below are some highlights from the above linked analysis:
Company Description: Digital Realty Trust, Inc., a real estate investment trust (REIT), that owns, acquires, repositions and manages technology-related real estate.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
DLR is trading at a discount to only 3.) above. The stock is trading at a 7.9% discount to its calculated fair value of $73.94. DLR earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
DLR earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. DLR earned a Star for having an acceptable score in at least two of the four Key Metrics measured.
Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2001-2004, 2002-2005, 2003-2006, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1947 and has increased its dividend payments for 8 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
DLR earned a Star in this section for its NPV MMA Diff. of the $49,803. This amount is in excess of the $2,700 target I look for in a stock that has increased dividends as long as DLR has. The stock's current yield of 4.% exceeds the 3.1% estimated 20-year average MMA rate.
Memberships and Peers: The company's peer group includes: Brandywine Realty Trust (BDN) with a 5.8% yield, CoreSite Realty Corporation (COR) with a 3.7% yield and Dupont Fabros Technology, Inc. (DFT) with a 2.0% yield.
Conclusion: DLR earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks DLR as a 4-Star Strong stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $182.03 before DLR's NPV MMA Differential decreased to the $2,700 minimum that I look for in a stock with 8 years of consecutive dividend increases. At that price the stock would yield 1.5%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,700 NPV MMA Differential, the calculated rate is 8.5%. This dividend growth rate is lower than the 17.4% used in this analysis, thus providing a significant margin of safety. DLR has a risk rating of 1.75 which classifies it as a Medoium risk stock.
DLR has found its niche by focusing on the technology side of the real estate market. A portfolio of highly coveted properties and high switching costs will keep DLR generating steady profits over the long haul. In addition, its relatively low free cash payout and debt to total capital leave room for future dividend increases. I will continue to add to my position while DLR is trading below its calculated fair value price of $73.94, and as my allocation allows.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long DLR (4.2% of my High-Yield Portfolio). See a list of all my dividend growth holdings here.
- Universal HealthRealty Income Trust (UHT) Dividend Stock Analysis
- AFLAC Incorporated (AFL) Dividend Stock Analysis
- Teco Energy, Inc. (TE) Dividend Stock Analysis
- McDonald's Corporation (MCD) Dividend Stock Analysis
- More Stock Analysis
Tags: [DLR] [BDN] [COR] [DFT]
Popular Posts - Last 7 days
Each Sunday I highlight any notable articles that I came across over the past week. Though I may not always agree with each of the articles ...
It's human nature for new income investors to focus on yield. Many eventually learn that above average yields often carry an above avera...
Linked here is a detailed quantitative analysis of Sysco Corporation (SYY). Below are some highlights from the above linked analysis: Com...
You expect your employer to give you a salary increase periodically. Why wouldn’t you expect the same from your investments? One of the most...
Linked here is a detailed quantitative analysis of General Dynamics (GD). Below are some highlights from the above linked analysis: Compa...
Presented below are my dividend stock and ETF/CEF holdings. This is not a recommendation to buy these securities. I have classified some of...
Monday, October 31, 2011 will mark my fourth full year of writing as Dividends4Life . It is hard to believe another year has passed. Like th...
Like many that came before me, I am on a journey to construct a portfolio that will provide me... Dividends 4 Life
Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in July, extending the s...
Linked here is a detailed quantitative analysis of AFLAC Incorporated (AFL). Below are some highlights from the above linked analysis: Co...