Dividend Stocks to Buy: CyrusOne (CONE)
Investing Type: Moderate
Dividend Yield: 3.1%
While our first thoughts on “the cloud” might drift to companies such as Microsoft Corporation (NASDAQ:MSFT) or Amazon.com, Inc. (NASDAQ:AMZN), many forget about the backbone of this industry — the actual cloud storage facilities.
Just like a REIT can use retail real estate to rent out space to Walgreens Boots Alliance Inc (NASDAQ:WBA), a company like CyrusOne Inc (NASDAQ:CONE) leases space for cloud storage. The importance of this niche category becomes even more prevalent when watching retail real estate investment trusts (REITs) decline thanks to bankruptcies in retail and struggling stores.
CyrusOne yields a hair over 3.1% and has returned about 10% year-to-date. It’s up an impressive 34% over the past six months, too.
Yes, the dividend yield isn’t great, but it makes up for that in payout growth — CONE has upped the ante on its dividend by more than 160% in just four years! Moreover, CyrusOne is a high-quality company with plenty of growth. Analysts expect revenues to balloon 27.4% this year and 17% next year. Earnings are expected to improve by 95% next year and 36.2% annually for the next five years.
Price-to-funds from operations (P/FFO, a more accurate way to value REITs than P/E) is a bit high at 20, and there’s always a chance of disruption when you dabble in tech.
But I would pick up CONE on any dip below $50. The dividend and business growth prospects are too attractive.