WF vs. BEN: Which Stock Should Value Investors Buy Now?
Data-center real estate investment trust (REIT) CoreSite Realty Corporation COR announced a hike of 5.1% in its quarterly cash dividend. The company will now pay a dividend of $1.03 per share for the second quarter, up from 98 cents paid in the prior quarter.
The raised dividend will be paid on Jul 16, to shareholders of record as on Jun 29, 2018.
Based on the increased rate, the annual dividend comes to $4.12 a share, resulting in a yield of about 3.9%, considering CoreSite’s closing price of $104.74 on May 25. The company has been consistently increasing its dividends. This reflects the company’s continued efforts to boost shareholders’ wealth.
Also, per the company’s CFO, Jeff Finnin, the recent dividend hike represents CoreSite’s robust operating performance and superior ability to generate higher cash flows.
CoreSite has robust fundamentals to back dividend hikes. In fact, the company has been a decent performer, beating the Zacks Consensus Estimate in three of the past four quarters, on funds from operations (FFO) per share basis, with an average positive surprise of 2.15%. Moreover, CoreSite’s return on equity (ROE) is 17.91%, significantly higher than the industry’s ROE of 4.9%.
Also, this data-center REIT churns cash flow per share of $5.99 as compared to the industry average of $1.90. The company has witnessed decent cash flow growth in the past. Further, CoreSite has current cash flow growth of 22.02% against the industry average of 6.2%. This will likely help the company sustain its dividend payout to equity investors.
In addition, fundamentals of the data-center real estate market remain robust. Estimated growth rate for the markets of artificial intelligence, Internet of Things, autonomous vehicle and virtual/augmented reality is also anticipated to remain robust, over the next five to eight years. In addition, the deployment of 5G network will likely spur growth of tower and fiber business as wireless carriers look to expand and enhance their networks. Therefore, along with an improved outlook for economic growth, all these indicate higher growth in demand for space at data-center REITs.
As investors prefer an income-generating stock, a high dividend-yielding one is obviously much coveted. Needless to say, investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to put their money on.
Shares of this Zacks Rank #3 (Hold) company have outperformed the industry it belongs to, in the past year. Its shares have rallied 4.1%, while the industry recorded growth of 1.3% during this time frame.
Some better-ranked stocks from the same space are Arbor Realty Trust ABR, Chatham Lodging Trust CLDT and Prologis, Inc. PLD. All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share has risen 14.4% to $1.03 in a month’s time. Its shares have returned 26.8% over the past year.
Chatham Lodging’s FFO per share estimates for the current year have inched up 1% to $1.93 in the past month. Its shares have gained 15.2% in a year’s time.
Prologis’ FFO per share estimates for 2018 have moved up 0.7% to $2.98 over the past month. Its shares have gained 18.7% over the past year.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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