Real Estate News: Digital Realty Foresees Another Strong Year

Last Monday, Digital Realty Trust (DLR) released its 2016 earnings outlook that provides strong evidence that 2016 will be a favorable year for the company. The results predict that DLR will experience a 7 percent core Funds from Operations (FFO) growth in 2016.

In a press release, DLR's Chief of Financial Operations Andrew Power shared his optimism saying, "We are seeing solid demand for Digital Realty's comprehensive set of data center solutions, which gives us confidence in our ability to achieve accelerating core FFO per share growth in 2016."

The data also shows that DLR's dividend is secure and growing. The company has maintained a track record of paying and increasing annual dividends for more than nine years in a row.

Power explained, "We also expect to generate double-digit AFFO per share growth, driven by greater cash flow contribution from our core business, accretion from the Telx acquisition and the continued burn-off of straight-line rent. In short, the quality of earnings is improving, the growth in cash flow is accelerating, and we are optimistic about the prospects for our business in 2016 and beyond."

Analysts initially figured DLR's 2016 core FFO to amount from $5.49 or $5.50 per share. But according to the company's 2016 earnings outlook, DLR is forecasting the company's FFO to amount from $5.45 to $5.60 which is 1 percent to 2 percent above the forecasted value.

KeyBanc Capital Markets' Jordan Sadler and Austin Wurschimdt explained that the increase is the result of favorable transaction financing and solid execution of the $1.9 billion Telx Holdings Inc. acquisition. Sadler and Wurschimdt also said that the company's "continued improvement" in the legacy portfolio is also a huge factor in the expected increase.

The KeyBanc analysts added that the company's expectations are "appropriately conservative" and are in line with theirs.

DLR outperformed the Indian real estate giant RMZ by over 200 basis points last Monday, which is a good indication that the market is positively reacting to the company.