The Only REIT That Can Thrive Amid the Great Coronavirus Sell-Off of 2020

The markets are in a panic again Thursday as investors flee for the exits.

Chatter has emerged about the possibility of new stimulus, new interest rate cuts, and payroll tax cuts. But it's clear that markets aren't responding well to the usual medicine sought over the last decade to instill confidence...

On Thursday night, U.S. President Donald Trump attempted to resolve concerns about the coronavirus spread with potential fiscal boosts. He proposed greater access to small-business loans, pitched cuts to payroll taxes, and issued a travel ban with Europe (because, why not?)

The markets haven't reacted well. For the second time this week, we triggered a circuit breaker, and the Dow Jones shed another 2,000 points.

Things continue to go from bad to worse...

Even some of our favorite low-interest rate plays like real estate investment trusts (REITs) haven't been immune to the market panic.

Investors are taking remaining gains off the table and reallocating capital to cash reserves, bonds, and even gold.

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But one REIT has remained immune to this selling pressure. That's because its unique position in the real estate market and the global economy is more critical than ever.

This is the REIT to buy and hold for the foreseeable future...

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Digital Realty Trust

The top REIT to buy and hold through the coronavirus downturn is Digital Realty Trust Inc. (NYSE: DLR).

This firm is one of the top computer services and IT facility operators in the United States and around the globe.

The company has over 210 data centers around the world. That makes it the backbone to the digitalized economy that continues to modernize our world.

The coronavirus will come and go.

But the "Fourth Industrial Revolution" will emerge as investors pile cash in the following categories:

  • 5G
  • Artificial intelligence
  • The Internet of Things
  • Blockchain networks

Data centers are holding up the world economy right now - and for the foreseeable future.

COVID-19 may drive additional "digital isolation" that is positive for the future of ecommerce, online education, online video, and other advancements in this world.

Digital Realty Trust recently expanded its Ireland operations with a new data center that will help bolster the multibillion-dollar boom expected to press across the European Union.

The firm had previously invested 200 billion euros into the city but added another 70 billion euros with this investment.

An Outstanding Earnings Report

In mid-February, DLR easily beat earnings expectations and helped investors continue to hold gains despite the ongoing market downturn.

The firm announced that it has accrued new leases totaling about $69 million in GAAP rental revenue. In addition, it experienced another $117 million in renewal rentals. This helped bolster its strong balance sheet.

The firm also said that its free cash flow per share (FFO/share) jumped from $1.54 to $1.62. This is a key metric for REITs given their reliance on dividends to pay investors.

The company also finalized details of a major merger with InterXion Holding NV (NYSE: INXN). InterXion is a leading provider of carrier-and-cloud-neutral colocation data center services in Europe.

Outlook for DLR in 2020 and Beyond

Despite a small pullback on Wednesday, Digital Realty Trust is showing that data centers are largely resilient from a fiscal pandemic.

Shares currently trade at $127. This is well above the 52-week lows that we saw in December 2019.

The stock currently offers a solid dividend of 3.49%. And it appears very safe in today's environment.

Action to Take: I believe that DLR will experience strong institutional flows once this market panic subsides. Investors will continue to look for ways to allocate capital in ways that are largely immune from this critical lesson about the fragility of our global economy. For that reason, I have set a one-year price target of $200 per share. That figure represents a potential upside of 57% from current levels.

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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