Within the real estate investment trust sector, data center REITs like Equinix, Inc. (REIT) (NASDAQ: EQIX), Digital Realty Trust, Inc. (NYSE: DLR), CyrusOne Inc. (NASDAQ: CONE), and CoreSite Realty Corporation (NYSE: COR), among others, are slowly but surely gaining popularity in investor circles. These REITs are responsible for owning and managing facilities that may be used to store data safely and reliably. As such, data center REITs offer products and services that aim to secure data and servers, such as by providing uninterruptable power supplies. With the outbreak of the coronavirus pandemic and the shift to working-from-home and online education, the demand for data, data storage, and security, practically skyrocketed, resulting in a 5.9% rise in the supply in major data centers in 2020. Keeping this in mind, thus, it is unsurprising that data center and data center REIT stocks are becoming notable investment options in 2021.
According to the National Association of Real Estate Investment Trusts, or Nareit, the total return for the top 5 data center REITs in 2020 was about 21%, and the total return for these stocks in July stood at 2.08%. These REITs were also reported to have paid out about $1,115 million in dividends in the first quarter of 2021 alone, while bringing in an accumulated FFO (funds from operations) of about $1,117 million. This optimistic performance in 2020 and 2021 is also another reason behind the rising popularity of data center REITs.
To put the above in perspective, we can note how according to a CNBC report this March, it was made clearer that we can expect a real boom in the data center REIT sector this year. According to Spencer Levy, who is a senior economic advisor for CBRE, a commercial real estate company, 2021 is expected to be a record year for data center REITs with about 500 megawatts of the new build being online as of March 2021. About 70% of this figure was already pre-leased at the time this comment was made. In 2020, data center REITs were also recorded to be the highest performing REIT sector because of the aforementioned 21% return.
Investing has become difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Without further ado, let's take a look at the 10 best data center REIT dividend stocks to buy.
Best Data Center REIT Dividend Stocks to Buy
10. Global X Data Center REITs & Digital Infrastructure ETF (NASDAQ: VPN)
Number of Hedge Fund Holders: N/A
Dividend Yield: 0.62%
Global X Data Center REITs & Digital Infrastructure ETF (NASDAQ: VPN), an exchange-traded fund, invests in data center REITs and digital infrastructure companies. The ETF ranks 10th on our list of the best data center REIT dividend stocks to buy and also invests in growth and value stocks.
In the past 6 months, Global X Data Center REITs & Digital Infrastructure ETF (NASDAQ: VPN) was up 25.29%, compared to the S&P 500's 18.74% gain. In the past 9 months, Global X Data Center REITs & Digital Infrastructure ETF (NASDAQ: VPN) was up 22.8%, compared to 23.69% for the S&P 500.
9. Equinix, Inc. (REIT) (NASDAQ: EQIX)
Number of Hedge Fund Holders: 33
Dividend Yield: 1.3%
Equinix, Inc. (REIT) (NASDAQ: EQIX), a digital infrastructure company, operates as a data center REIT to serve digital leaders. The REIT enables leaders in the sector to access suitable infrastructure for the smooth provision of digital services. It ranks 9th on our list of the best data center REIT dividend stocks to buy now.
Truist holds a Buy rating on shares of Equinix, Inc. (REIT) (NASDAQ: EQIX) as of this July, and also raised its price target on the stock from $900 to $925.
In the second quarter of 2021, Equinix, Inc. (REIT) (NASDAQ: EQIX) had an FFO of $3.78, missing estimates by $1.03. The company's revenue was $1.66 billion, up 12.77% year over year and beating estimates by $17.77 million. Equinix, Inc. (REIT) (NASDAQ: EQIX) has gained 46.27% in the past 6 months and 27.47% year to date.
Baron Funds, an asset management firm, mentioned Equinix, Inc. (REIT) (NASDAQ: EQIX) in its second-quarter 2021 investor letter. Here's what they said:
“The shares of Equinix, Inc. gained 18% in the most recent quarter. Equinix is the premier global data center company in the world. We believe the company is exceptionally well positioned to continue to benefit from powerful secular demand trends including strong growth in information technology outsourcing, increased cloud computing adoption, multi-year increases in mobile data traffic, global internet traffic, and the number of connected devices.”
8. Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSE: SRVR)
Number of Hedge Fund Holders: N/A
Dividend Yield: 1.31%
Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSE: SRVR) is another ETF on our list of the best data center REIT dividend stocks to buy, ranking 8th. The ETF invests in real estate, management and development, real estate operators and lessors, nonresidential building operators and lessors, and real estate operating companies.
In the past year, Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSE: SRVR) had a price return of 19.40%, compared to a 31.27% price return for the S&P 500. The company's total return was 21.27%, compared to the S&P 500's 10.40% total return. Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSE: SRVR) has gained 31.23% in the past 6 months and 23.08% year to date.
7. American Tower Corporation (REIT) (NYSE: AMT)
Number of Hedge Fund Holders: 55
Dividend Yield: 1.6%
American Tower Corporation (REIT) (NYSE: AMT) is among the largest global data center REITs, and an independent owner, operator, and developer of multitenant communications real estate. The company has about 181,000 communications sites, and ranks 7th on our list of the best data center REIT dividend stocks to buy.
As of this August, Argus holds a Buy rating on shares of American Tower Corporation (REIT) (NYSE: AMT), and has also raised its price target on the stock from $288 to $300.
In the second quarter of 2021, American Tower Corporation (REIT) (NYSE: AMT) had an FFO of $2.73, beating estimates by $0.43. The company's revenue was $2.30 billion, up 20.17% year over year and beating estimates by $77.22 million. American Tower Corporation (REIT) (NYSE: AMT) has gained 50.11% in the past 6 months and 37.53% year to date.
By the end of the second quarter of 2021, 55 hedge funds out of the 873 tracked by Insider Monkey held stakes in American Tower Corporation (REIT) (NYSE: AMT) worth roughly $4.7 billion. This is compared to 58 hedge funds in the previous quarter with a total stake value of approximately $4.6 billion.
Richie Capital Group LLC, an equity-focused investment management firm, mentioned American Tower Corporation (REIT) (NYSE: AMT) in its fourth-quarter 2020 investor letter. Here's what they said:
“American Tower (AMT – Down 9.15%) – The largest operator of wireless towers has faced challenges in the form of customer churn at one of their largest customers: Sprint/T-Mobile. However, the company remains well positioned as carriers domestically and internationally transition to 5G which will require a densification of their networks.”
6. iShares Cohen & Steers REIT ETF (BATS: ICF)
Number of Hedge Fund Holders: 4
Dividend Yield: 1.78%
iShares Cohen & Steers REIT ETF (BATS: ICF), yet another ETF, is next on our list of the best data center REIT dividend stocks to buy. The fund invests in mortgage real estate investment trusts (REITs), financials, diversified financials, and equity real estate investment trusts (REITs), among others. It ranks 6th on our list.
In the past year, the price return for iShares Cohen & Steers REIT ETF (BATS: ICF) was 35.05%, compared to the S&P 500's 31.27% price return. The total return for the ETF was 38.15%, compared to a 10.40% total return for the S&P 500. iShares Cohen & Steers REIT ETF (BATS: ICF) has gained 9.6% in the past 6 months and 28.38% year to date.
By the end of the second quarter of 2021, 4 hedge funds out of the 873 tracked by Insider Monkey held stakes in iShares Cohen & Steers REIT ETF (BATS: ICF) worth roughly $2.4 million. This is compared to 5 hedge funds in the previous quarter with a total stake value of approximately $3.2 million.
5. CyrusOne Inc. (NASDAQ: CONE)
Number of Hedge Fund Holders: 26
Dividend Yield: 2.58%
CyrusOne Inc. (NASDAQ: CONE), a global REIT, specializes in the design, construction, and operation of over 50 data centers across the globe. It ranks 5th on our list of the best data center REIT dividend stocks to buy, and is based in Dallas, Texas.
Raymond James has an Outperform rating on shares of CyrusOne Inc. (NASDAQ: CONE) as of this July, alongside an $82 price target.
In the second quarter of 2021, CyrusOne Inc. (NASDAQ: CONE) had an FFO of $1, beating estimates by $0.02. The company’s revenue was $284.6 million, up 11% year over year and beating estimates by $8.67 million. CyrusOne Inc. (NASDAQ: CONE) has gained 26.59% in the past 6 months and 15.67% year to date.
By the end of the second quarter of 2021, 26 hedge funds out of the 873 tracked by Insider Monkey held stakes in CyrusOne Inc. (NASDAQ: CONE) worth roughly $487 million. This is compared to 21 hedge funds in the previous quarter with a total stake value of approximately $202 million.
4. Crown Castle International Corp. (REIT) (NYSE: CCI)
Number of Hedge Fund Holders: 42
Dividend Yield: 2.68%
Crown Castle International Corp. (REIT) (NYSE: CCI) is an owner and operator of over 40,000 cell towers and 80,000 route miles of fiber to support small cells and fiber solutions across US markets. The company ranks 4th on our list of the best data center REIT dividend stocks to buy.
KeyBanc holds an Overweight rating on shares of Crown Castle International Corp. (REIT) (NYSE: CCI) as of this July, and has also raised its price target on the stock from $207 to $224.
In the second quarter of 2021, Crown Castle International Corp. (REIT) (NYSE: CCI) had an FFO of $1.69, beating estimates by $0.06. The company’s revenue was $1.58 billion, up 9.93% year over year and beating estimates by $22.48 million. Crown Castle International Corp. (REIT) (NYSE: CCI) has gained 33.11% in the past 6 months and 28.06% year to date.
By the end of the second quarter of 2021, 42 hedge funds out of the 873 tracked by Insider Monkey held stakes in Crown Castle International Corp. (REIT) (NYSE: CCI) worth roughly $2.1 billion. This is compared to 43 hedge funds in the previous quarter with a total stake value of approximately $1.9 billion.
3. Digital Realty Trust, Inc. (NYSE: DLR)
Number of Hedge Fund Holders: 30
Dividend Yield: 2.77%
Digital Realty Trust, Inc. (NYSE: DLR) is a data center REIT that supports leading enterprises and service providers across the globe through the delivery of its data center, colocation, and interconnection solutions. The company ranks 3rd on our list of the best data center REIT dividend stocks to buy.
This August, Citi analyst Michael Rollins raised the price target on shares of Digital Realty Trust, Inc. (NYSE: DLR) from $160 to $179. The analyst also holds a Buy rating on the stock.
In the second quarter of 2021, Digital Realty Trust, Inc. (NYSE: DLR) had an FFO of $1.54, missing estimates by $0.04. The company’s revenue was $1.09 billion, up 10.09% year over year and beating estimates by $22.13 million. Digital Realty Trust, Inc. (NYSE: DLR) has gained 29.92% in the past 6 months and 23.88% year to date.
By the end of the second quarter of 2021, 30 hedge funds out of the 873 tracked by Insider Monkey held stakes in Digital Realty Trust, Inc. (NYSE: DLR) worth roughly $424 million. This is compared to 22 hedge funds in the previous quarter with a total stake value of approximately $296 million.
2. CoreSite Realty Corporation (NYSE: COR)
Number of Hedge Fund Holders: 16
Dividend Yield: 3.29%
CoreSite Realty Corporation (NYSE: COR) works to deliver secure, high-performance, and reliable data center, cloud access, and interconnection solutions across eight North American markets. The company ranks 2nd on our list of the best data center REIT dividend stocks to buy.
Barclays raised the price target on shares of CoreSite Realty Corporation (NYSE: COR) from $118 to $123 this August.
In the second quarter of 2021, CoreSite Realty Corporation (NYSE: COR) had an FFO of $1.42, beating estimates by $0.06. The company’s revenue was $162.12 million, up 7.69% year over year and beating estimates by $2.21 million. CoreSite Realty Corporation (NYSE: COR) has gained 41.26% in the past 6 months and 27.08% year to date.
By the end of the second quarter of 2021, 16 hedge funds out of the 873 tracked by Insider Monkey held stakes in CoreSite Realty Corporation (NYSE: COR) worth roughly $198 million. This is compared to 15 hedge funds in the previous quarter with a total stake value of approximately $173 million.
Baron Funds, an asset management firm, mentioned CoreSite Realty Corporation (NYSE: COR) in its second-quarter 2021 investor letter. Here’s what they said:
“CoreSite Realty Corporation: CoreSite is a REIT that operates a highquality real estate portfolio of 25 well-located real estate data centers in eight markets in the U.S. We believe the company is poised for a positive inflection in cash flow growth in the next few years. In our opinion, the shares are attractively valued relative to its public data center peers and recent private market transactions.”
1. Iron Mountain Incorporated (NYSE: IRM)
Number of Hedge Fund Holders: 25
Dividend Yield: 5.01%
Iron Mountain Incorporated (NYSE: IRM) is a global leader in the storage and management of information. The company ranks 1st on our list of the best data center REIT dividend stocks to buy and is based in Boston.
Wells Fargo holds an Overweight rating on shares of Iron Mountain Incorporated (NYSE: IRM) as of this February, and has also raised the price target on the stock from $32 to $38.
In the second quarter of 2021, Iron Mountain Incorporated (NYSE: IRM) had an FFO of $0.69, beating estimates by $0.05. The company’s revenue was $1.12 billion, up 14% year over year and beating estimates by $25.69 million. Iron Mountain Incorporated (NYSE: IRM) has gained 41.41% in the past 6 months and 72.30% year to date.
By the end of the second quarter of 2021, 25 hedge funds out of the 873 tracked by Insider Monkey held stakes in Iron Mountain Incorporated (NYSE: IRM) worth roughly $81.9 million. This is compared to 16 hedge funds in the previous quarter with a total stake value of approximately $56.3 million.
