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The "Fab Five" Among Data Center REITs

As investors try to make sense of all the perplexing data that feeds the bull/bear debate on an almost hourly basis, there are some truly powerful secular trends in place that are, in my view, quite suitable for those investors seeking good yields and predictable revenue and earnings growth, asserts Bryan Perry, income expert and editor of Cash Machine.

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For example, the cloud computing market  is expected to reach $441 billion in size by 2020, according to Gartner.

The firm predicts that by 2021, 28% of all IT spending will be for cloud-based infrastructure, middleware, application and business process services. The global market will reach $1.82 trillion by 2024, nearly five-fold higher than when the final numbers come in for 2019.

Within this megatrend lie the data center REITs — Equinix (EQIX), CoreSite Realty Corporation (CORE), Digital Realty (DLR), CyrusOne (CONE) and QTS Realty Trust (QTS) are the five go-to names in the sector.

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As a group, they generate high single-digit-percentage revenue and double-digit-percentage earnings growth with a history of strong dividend gains.

Moreover, if bought in equal amounts, the fab-five of data center REITs sports a blended dividend yield of 3.35%, contending with utilities and consumer staples for highest defensive sector yields, but with much higher growth prospects.

So, while investors try to make heads or tails of global growth prospects, betting on the future of America’s biggest data center operators looks like a sure thing.