Value Investing News

Digital Realty Trust, Inc., a real estate investment trust (REIT), that owns, acquires, repositions and manages technology-related real estate. Linked here is a detailed analysis and commentary.

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Growth or yield? In a perfect world, income investors would want both from their investments and are not interested in investments that offer neither. This is where the common ground ends, and the debate begins. Without the benefit of a perfect world, we are left with the middle ground which is a balancing act between growth and yield.

The latest 10-K filing by Digital Realty Trust, Inc.

The latest 10-K filing by Digital Realty Trust, L.P.

The latest 10-K filing by Digital Realty Trust, Inc.

The latest 10-K filing by Digital Realty Trust, L.P.

There are income investors and Dividend Growth investors. While the distinction is rather simple, it slips past many casual observers. Income investors are investing for maximum current income, while dividend growth investors are looking to maximize income over an extended period of time — usually sacrificing current income for potential greater future earnings.

Almost one and half years after the dividend was cut, the company raised its quarterly dividend 20% to 12 cents/share on Friday. The news sent the stock over 3% higher for the day. Whether the company can rebuild its streak of consecutive dividend increases remains to be seen however.

Dividend stocks are sometimes referred to as defensive stocks since many investors flee to them in an economic downturn. Their dividends, if sustainable, provide a minimum level of positive return. This cushions the downward pressure from the market. Better yet, great dividend companies not only sustain their dividends in a downturn – they actually raise them.

For dividend growth investors, there are certain attributes of investments that are more relevant than others, such as yield and dividend growth. To illustrate the power of dividend growth consider that an investment’s yield-on-cost will double every 5 years if they grow their dividend by 15%/year or 7 years at 10%/year or 14 years at 5%/year.