It’s all too easy for investors to lose sight of the big picture if they don’t keep a tight grip on their emotions. However, I am certain that investors will still see the big picture if they stick to investing in the best firms with appropriate valuations in industries with exciting developments.
Due to the present role that tech has in today’s marketplace, real estate investment trusts (REITs) that are tech-oriented will almost certainly profit from robust expansion during the years ahead. Let’s look at two technological trends for real estate that may help investors build considerable wealth over time.
1. Data centers
A data center is a facility that holds and processes data. Email, websites, online transactions, and other activities are all dependent on data centers for their success. It’s easy to see how data centers will become increasingly integrated into our daily lives as technology advances and the global economy grows.
This is why data center industry experts predict that the worldwide market will almost triple from $187.4 billion in 2020 to $517.2 billion by the year 2030. Digital Realty Trust ( DLR -0.60% ), which has a market capitalization of $42 billion and a portfolio of 285 data centers, will benefit significantly as a result of this unstoppable trend.
The data center industry is a large and growing market, offering significant growth potential for Digital Realty. The company’s leading role in the data center sector explains how its FFO per share has compounded at 10% per year since 2005. Despite its enormous size, the outlook for the industry should drive up Digital Realty’s core FFO per share by the mid to high single digits each year into the foreseeable future.
The dividend will likely rise in line with core FFO per share because of the stock’s 70% dividend payout ratio in 2021. As a result, I believe that Digital Realty has many years of 5% to 6% yearly dividend increases left in the tank. This is a desirable combination of yield and growth potential, given that it offers a market-beating 3.3% starting yield together with a 3.9 percent growth rate through 2022.
With the year’s first 2 months in the books, Digital Realty (DLR) has already suffered a 16% drop in stock price. As a result, it is currently valued at a core-FFO-a-share multiple of just 21.4. This dividend increases stocks is becoming a wise real estate investment right now because it has an extremely attractive valuation and strong growth potential.
2. Telecom towers
Telecom towers, like data centers, are already a significant component of the world economy. These buildings enable us to do things with our cell phones that we take for granted, such as read and send email, surf the internet, purchase goods and services online, and bank online.
The rise of global mobile data usage and penetration rates in remote areas is one source for the anticipated tremendous development in the telecom tower market. The industry is expected to nearly triple from $39.5 billion in 2018 to $114.1 billion by 2026, according to analysts.
American Tower (AMT-1.08%), with a $120 billion market value, is the world’s leading telecom tower business. That prominence has helped to propel its ten-year AFFO growth of 13.8% on an annual basis.
With such a positive industry outlook, American Tower should continue to expand AFFO per share by at least 10% yearly for the next several years. This is most likely why the company is brave enough to promise a dividend growth rate of 12.5% in 2022, with its 54 percent dividend payout ratio. Considering that American Tower has a 2.2% dividend yield, this is a fantastic combination of income and growth prospects.
The stock has been dragged down with the rest of the tech sector this year, like Digital Realty. American Tower is trading at about $260 per share today, down 10% from its all-time high. That makes it a good buy for a stock with this level of quality and growth potential.