The Risk of a Dividend Cut Has Dropped Sharply for This High-Yield Stock
Digital Realty (NYSE: DLR) is investing heavily to expand its data center operations to capitalize on tailwinds like digital transformation and artificial intelligence. However, because of the company's stretched financial profile, accessing capital to fund its growth is getting more challenging. That has increased the risk that the company might need to reduce its dividend to finance expansion projects.
The company has been working to avoid that fate by executing a roughly $2 billion capital recycling strategy. It recently completed a big piece of that puzzle. As a result, its 4.2%-yielding dividend is looking a lot safer.
Digital Realty is investing $2.3 billion to $2.5 billion this year to develop additional data center properties to support growing demand. The data center REIT has been working to cobble together a capital plan to fund its expansion without causing further deterioration to its financial profile.
Source Fool.com
