Investors can get caught up in the short-term volatility of stock price movements. But savvy investors know that the best opportunities often appear when stock prices are far from fundamentals and marred by pessimism.
So far this year, they’re down 31% and 37%, respectively. Digital Realty Trust (DLRMore 0.17%) When Simon Property Group (SPGs 0.16%) two persons real estate investment trust (REIT) fundamentals are stronger than expected in recent performance.For context, this is S&P 500 During that time, the index has fallen 17%. Let’s dig into the case by REIT.
1. Digital Reality Trust
In the last 70 years, which innovation has revolutionized the world more than any other? The answer, I would argue, is the mainframe, now known as the data center. Without data centers, the modern economy as we know it wouldn’t exist.
Everything from shopping online to checking email, browsing the web and streaming videos depends on the ability of data centers to connect devices, process and store data. Also, everyone appreciates Digital Realty’s 300+ trusted data centers around the world for stable access to the web and all its facilities.
As the penetration of e-commerce and video streaming continues to rise around the world, so will the demand for data centers. Allied Market Research, a market research firm, predicts that the global data center industry will grow from $187.4 billion in 2020 to $517.2 billion by 2030, at a rate of 10.5% annually. The reason is.
Digital Realty is already a big player in the data center market, so the law of large numbers will likely cause its growth to lag the industry as a whole.But the company’s core Operating funds (FFO) will grow at least by a mid-single-digit to high-single-digit rate each year in the near future.
Digital Realty offers passive income investors 4% dividend yieldThis is well above the 1.6% yield of the S&P 500 index. Given that payout ratio At 71.8% in 2022, the dividend should be safe and grow as fast as the core FFO per share.
Also, Digital Realty’s share price has fallen significantly in recent months, making the stock valuation interesting. In my opinion, Digital Realty’s stock price and his FFO in core ratio of his per share is only 17.9. This is a bargain for a promising industry leader.
2. Simon Property Group
When you think of shopping malls in this supposedly golden age of e-commerce, what’s the first word that comes to mind? Maybe prehistoric? The world’s largest mall owner, known as Simon Property Group, has worked to dispel these preconceptions. As of June, the REIT holds wholly or partially owned shares in more than 200 shopping, dining and mixed-use properties in the US, Europe and Asia.
Moll either had to adapt to the current environment or eventually succumb. Shopping malls cannot compete with e-commerce without a focus on providing unique experiences for consumers. Consumers can buy products online from the comfort of their own home, but the novelty of top-tier shopping malls remains unparalleled.
Simon Property Group saw the writing on its walls years ago that it needed to improve the consumer experience in order to both survive and thrive.Therefore, the company actively Added interesting features In recent years, malls such as food courts, restaurants, and aquariums.
At first glance, Simon Property Group’s 6.9% dividend yield looks like a yield trap. But with a payout ratio set at around 59% in 2022, Simon Property Group is no yield trap. Also, a yield-oriented investor can acquire shares in his REIT at a futures price of just 8.6 and his FFO ratio.
Cody Kester Affiliated with Digital Realty Trust and Simon Property Group. The Motley Fool invests in and recommends Digital Realty Trust. The Motley Fool US Headquarters recommends Simon Property Group. The Motley Fool has Disclosure policy.