Real estate investment trusts (REITs) have been around for decades, allowing investors to buy into real estate not through land itself, but through a publicly traded company. These REITs, thanks to certain tax advantages, are required to throw off the majority of their earnings to shareholders as dividends, making them popular among the income crowd.
Datacenter REITs, however, are an interesting breed. They build, own and manage datacenters for corporate clients, and bridge the gap between dividend-heavy real estate and growth-oriented tech stocks.
Funnily, this business was supposed to have been killed in the age of the cloud, but it turns out to have been a boon for well-run operators. While the bulk of processing is now done in cloud data centers like those of Amazon.com, Inc. (NASDAQ:AMZN), big companies are increasingly using third-party data centers to maintain and communicate corporate data stores.
Centers with the best optical connectivity, and good security, are becoming integral to the cloud, with super-fast interconnects between and among scaled clouds now dominating the world of computing.
Stock in data center REITs are up an average of 4.5% for the first quarter.
REITs themselves have been around for a half century. The whole category is hot again, thanks to the decision to separate these trusts from banking and insurance stocks last year, which increased interest in the stocks from index funds like the Vanguard REIT Index ETF (NYSEARCA:VNQ) and iShares Real Estate ETF (NYSEARCA:IYR). Datacenter REITs, however, are a particularly beloved play right now, with this subset charging ahead 4.5% for the first quarter to beat the broader sector.
Datacenter REITs are poised to deliver a rare combination of stable, secure income and steady growth connected to the continued explosion of technological advances. Today, we’ll look at five of these solidly yielding real estate/tech stocks that should continue to perform in the years ahead.