Key Takeaways
- • Wide Moat Research's Brad Thomas named Digital Realty Trust (DLR) and Equinix (EQIX) as his two favored blue-chip data center REITs, per the Navellier Market Buzz discussion.
- • Thomas places Equinix in his buy zone after a modest, rate-driven pullback, framing it as roughly a 20% total-return opportunity including an estimated 10% growth forecast for next year.
- • Thomas views Digital Realty as closer to fairly valued, citing an estimated growth rate near 17% for 2026 and a BBB+ S&P credit rating.
- • Thomas warns that unusually high dividend yields, which he calls "sucker yields," often signal risk, and urges investors to prioritize balance-sheet quality such as fixed-rate, laddered debt and conservative payout ratios.
Summary
Data center REITs own and lease the facilities that house servers, storage, and networking equipment behind AI, cloud computing, and internet services. Per the article, FactSet forecasts roughly 65% earnings growth for the S&P 500 information technology sector in the third quarter, driven by demand for semiconductors, memory, and power equipment tied to the AI and data center buildout. Wide Moat Research's Brad Thomas, speaking on the Navellier Market Buzz podcast, argues that higher interest rates, which have pressured real estate for roughly two years, create an opening for well-capitalized REITs. Stronger owners with lower-cost capital and greater scale can acquire assets as smaller, highly leveraged owners face refinancing pressure.
Thomas highlighted two names. Digital Realty Trust (DLR) operates roughly 300 data centers worldwide and has paid dividends for more than two decades. Consensus estimates point to growth near 17% for 2026. Thomas considers the stock closer to fairly valued after a modest pullback, though he regards its quality as unquestioned, citing its BBB+ credit rating from S&P. Equinix (EQIX) operates about 280 data centers across 77 markets. According to Thomas, it has never posted a year of negative earnings growth since converting to a REIT in 2015 and has raised its dividend every year since. The stock yields about 2%, carries an investment-grade BBB+ balance sheet, and keeps its payout ratio low to fund reinvestment. Thomas places Equinix in his buy zone.
The article identifies the "sucker yield" as the most common mistake among REIT investors. Thomas notes that yields of 9% to 14% often signal risk and may precede a dividend cut that erodes principal. Quality indicators include well-laddered, fixed-rate debt with extended maturities, an investment-grade credit rating, and a conservative payout ratio. Realty Income (O) is cited as an example of durable dividend growth, having kept raising earnings through periods when large tenants stopped paying rent.
The article also notes that Micron Technology (MU) was the most-searched ticker on the author's Stock Grader AI tool, linking the memory-chip story to the data center theme. The piece is written by Louis Navellier, who discloses ownership of Micron shares, and is presented as educational content rather than investment advice.
Thomas highlighted two names. Digital Realty Trust (DLR) operates roughly 300 data centers worldwide and has paid dividends for more than two decades. Consensus estimates point to growth near 17% for 2026. Thomas considers the stock closer to fairly valued after a modest pullback, though he regards its quality as unquestioned, citing its BBB+ credit rating from S&P. Equinix (EQIX) operates about 280 data centers across 77 markets. According to Thomas, it has never posted a year of negative earnings growth since converting to a REIT in 2015 and has raised its dividend every year since. The stock yields about 2%, carries an investment-grade BBB+ balance sheet, and keeps its payout ratio low to fund reinvestment. Thomas places Equinix in his buy zone.
The article identifies the "sucker yield" as the most common mistake among REIT investors. Thomas notes that yields of 9% to 14% often signal risk and may precede a dividend cut that erodes principal. Quality indicators include well-laddered, fixed-rate debt with extended maturities, an investment-grade credit rating, and a conservative payout ratio. Realty Income (O) is cited as an example of durable dividend growth, having kept raising earnings through periods when large tenants stopped paying rent.
The article also notes that Micron Technology (MU) was the most-searched ticker on the author's Stock Grader AI tool, linking the memory-chip story to the data center theme. The piece is written by Louis Navellier, who discloses ownership of Micron shares, and is presented as educational content rather than investment advice.
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