DLR's niche real estate portfolio is the biggest reason behind this stock's attractiveness. Demand for internet data centres and gateways is growing fast thanks to data-driven services (like cloud storage), boosting DLR's market for tenants. As long as firms need more virtual space to store data, they'll also need more physical space to store servers; that's space that DLR is uniquely qualified to provide. Because tenants' properties are effectively built to suit their specific technical needs, switching costs are very high, and DLR's renewal rates are stellar.
Income investors love this stock right now, even if everyone else doesn't. That's because this REIT is essentially a purpose-built income generation tool. Digital Realty enters into long-term triple-net leases with tenants, an arrangement that takes most of the risks off of DLR's balance sheet and puts the onus on tenants instead. The result is a predictable income stream and a hefty 4.3 per cent dividend yield right now. That, coupled with a high short interest ratio, make DLR a solid short squeeze candidate going into 2013.
Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes ,Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.
At the time of publication, author had no positions in stocks mentioned.
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