Deep Dive into the Dividend Performance and Sustainability of Digital Realty Trust Inc
Digital Realty Trust Inc(DLR, Financial) recently announced a dividend of $1.22 per share, payable on 2023-09-29, with the ex-dividend date set for 2023-09-14. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Digital Realty Trust Incs dividend performance and assess its sustainability.
What Does Digital Realty Trust Inc Do?
Digital Realty owns and operates over 300 data centers worldwide. It has nearly 40 million rentable square feet across five continents. Digital's offerings range from retail co-location, where an enterprise may rent a single cabinet and rely on Digital to provide all the accommodations, to "cold shells," where hyperscale cloud service providers can simply rent much, or all, of a barren, power-connected building. In recent years, Digital Realty has de-emphasized cold shells and now primarily provides higher-level service to tenants, which outsource their related IT needs to Digital. Digital Realty has also moved more into the co-location business, increasingly serving enterprises and facilitating network and cloud connections. Digital Realty operates as a real estate investment trust.
A Glimpse at Digital Realty Trust Inc's Dividend History
Digital Realty Trust Inc has maintained a consistent dividend payment record since 2004. Dividends are currently distributed on a quarterly basis. Digital Realty Trust Inc has increased its dividend each year since 2004. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 19 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Digital Realty Trust Inc's Dividend Yield and Growth
As of today, Digital Realty Trust Inc currently has a 12-month trailing dividend yield of 3.80% and a 12-month forward dividend yield of 3.80%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, Digital Realty Trust Inc's annual dividend growth rate was 4.10%. Extended to a five-year horizon, this rate increased to 5.30% per year. And over the past decade, Digital Realty Trust Inc's annual dividends per share growth rate stands at 5.30%.
Based on Digital Realty Trust Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Digital Realty Trust Inc stock as of today is approximately 4.92%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Digital Realty Trust Inc's dividend payout ratio is 3.84, which may suggest that the company's dividend may not be sustainable.
Digital Realty Trust Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Digital Realty Trust Inc's profitability 7 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Digital Realty Trust Inc's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Digital Realty Trust Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Digital Realty Trust Inc's revenue has increased by approximately 0.90% per year on average, a rate that underperforms than approximately 50.24% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Digital Realty Trust Inc's earnings increased by approximately -22.10% per year on average, a rate that underperforms than approximately 80.62% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 13.70%, which underperforms than approximately 26.21% of global competitors.
Next Steps
With a consistent dividend payment record, a healthy dividend yield and growth, and a strong profitability rank, Digital Realty Trust Inc appears to be a solid choice for dividend-focused investors. However, the company's high payout ratio and relatively lower growth metrics compared to competitors call for caution. Investors should therefore consider these factors and their own risk tolerance before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
