Editor’s note: This column is part of our Best Stocks for 2017 contest. Brett Owens’ pick for the contest is CoreSite Realty Corp (NYSE:COR).
CoreSite Realty Corp (NYSE:COR) builds “roads” — private data center facilities — for the bustling information superhighway. It then collects tolls by leasing them back to its clients.
These days, more and more devices are online — thanks to these data centers. Your own computer, smartphone, TV and even your car are likely able to access the cloud. As a result, demand for these types of facilities is exploding.
Think of COR stock as part developer, part landlord. It builds, and then signs its 900-plus clients (such as Microsoft Corporation (NASDAQ:MSFT) and Verizon Communications Inc. (NYSE:VZ)) to long-term leases. The firm is structured as a real-estate investment trust, or REIT, which means it’s required to pay most of its earnings back to shareholders as dividends.
CoreSite Raises its Payout Back-to-Back
Shares pay a 3.3% dividend yield today, and the growth of the payout is even more exciting. Business is booming, and CoreSite has an ideal niche within the data center business. It has the big names, but tends to focus more on small companies — which are more profitable because they don’t make the price demands of the major brands.
With the firm being an REIT, its cash flow gets dished directly back to us as dividends. Since I originally recommended CoreSite in December, the company has raised its dividend not once but twice — from 53 cents to 80 cents in December, then to 90 cents in this most recent quarter. That’s a 70% payout boost in just seven months!
Poor COR Stock Can’t Keep Up
But CoreSite’s stock price has “only” gained 44% since then — a sign that its share price is having trouble keeping up with its payout growth. This has been the case for much of the stock’s recent history. Try as it might, it often falls behind its dividend (which has increased an amazing 400% in five years).
CoreSite is currently knocking on the door of the top spot in the contest, and with its investors constantly “on alert” for the next big dividend raise, this stock should continue rolling for the rest of 2017. If it sells off along with other REITs on silly “first-level worries” such as higher interest rates, be sure to buy any pullback in COR stock.
Brett Owens is the Chief Investment Strategist for Contrarian Outlook. As of this writing, he was long COR.
