Digital Realty Trust, Inc. (DLR): A High Quality REIT Consistently Growing Dividends

However, all REIT investors should be aware of capital market risk – companies will cut the dividend before they miss interest payments during times of financial stress.

Source: Digital Realty Fact Sheet

Dividend Analysis: Digital Realty

We analyze 25+ years of dividend data and 10+ years of fundamental data to understand the safety and growth prospects of a dividend. DLR’s long-term dividend and fundamental data charts can all be seen by clicking here.

Dividend Safety Score

Our Safety Score answers the question, “Is the current dividend payment safe?” We look at factors such as current and historical EPS and FCF payout ratios, debt levels, free cash flow generation, industry cyclicality, ROIC trends, and more. Scores of 50 are average, 75 or higher is very good, and 25 or lower is considered weak.

Digital Realty’s Dividend Safety Score of 77 indicates that its current dividend payment appears to be very safe today. The company’s adjusted funds from operations (AFFO) payout ratio in 2015 was a reasonable 78%, and Digital Realty targets an AFFO payout ratio below 90%.

While this would be a relatively high payout ratio for many types of businesses, Digital Realty has generated very stable earnings and growth since it went public.

Source: Simply Safe Dividends

Demand for data centers is also somewhat resistant to economic cycles. The company’s sales grew over 20% in 2009 as businesses continued outsourcing their mission-critical data center needs. DLR’s stock also outperformed the S&P 500 by 29% in 2008.