Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) entered the PC industry early with the latter capitalizing on smartphones as well. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) set up online platforms that forever changed the ways people shop and consume information.
Truly, we have experienced many technological innovations over the years. But, tech needs a foundation to grow and stay in its current form. Therefore, data centers handle the intense workloads that are necessary for technological innovations. So, behind every cloud solution, website, and artificial intelligence (AI) tool is a data center.
These centers are important for technology and society and give investors an opportunity to generate higher returns. Let’s explore some of the top data center dynamos to consider.
Digital Realty Trust (DLR)
Digital Realty Trust (NYSE:DLR) has enjoyed a resurgence and is up by 31% year to date (YTD). The rising demand for data centers with AI taking center stage has helped the company increase its gains.
Net income available to shareholders surged from $0.75 per share in 3Q22 to $2.33 per share in 3Q23. Additionally, revenue reached $1.4 billion, representing an 18% year-over-year (YOY) increase. The stock has an enticing 3.60% dividend yield for investors who accumulate shares now.
Also, Digital Realty Trust has a vast portfolio of over 300 facilities in over 50 metro areas. Its facilities are spread across six continents. The firm has over 5,000 customers including many big tech companies. DLR is in the process of reducing leverage and increasing liquidity which can help it generate higher returns for shareholders.
And, a record backlog of $482 million suggests the good times may continue for the data center dynamo. Additionally, the company achieved its highest same-capital cash NOI growth in over ten years.
Iron Mountain (IRM)
Iron Mountain (NYSE:IRM) has been a reliable long-term pick that features a high yield and respectable returns. Shares have gained 39% YTD and more than doubled over the past five years. Currently, the stock has a 3.75% dividend yield.
Established in 1951, Iron Mountain stores paper documents. Even with advanced technology, it’s still important to keep these assets safe. Also, IRM has a data center infrastructure and serves more than 225,000 customers worldwide.
Further, the firm has delivered nine consecutive years of dividend increases. It’s likely to reach its 10th year and go well beyond that milestone since it has 95% of the Fortune 1,000 companies as its customers.
Notably, most customers tend to stick with Iron Mountain for a long time. The firm has a 98% renewal rate which results in steady revenue and dividend payments for investors. And, the high renewal rate helped the firm secure its highest quarterly revenue and adjusted EBITDA figures. Finally, total revenue increased by 8% YOY in the third quarter.
Equinix (EQIX)
Equinix (NASDAQ:EQIX) has lagged the other two data center stocks YTD but has outperformed them over the past five years. The Redwood City, California, company is up by 21% YTD and 127% over the past five years. And, investors get to enjoy a 2.10% dividend yield at current levels.
Equinix impressed with a busy third quarter that featured over 4,200 deals closing among 3,100 customers. Revenue grew by 12% YOY within that timeframe. Impressively, the company’s outperformance led to a generous 25% YOY dividend hike. The firm now pays a quarterly dividend of $4.26 per share, and operating income has increased by 14% YOY.
Also, the corporation posted 2023 revenue guidance that projects a 12-13% YOY increase compared to all of 2022. Finally, the company is aiming for revenue between $2.088 and $2.128 billion in the fourth quarter.
Artificial intelligence has benefitted many companies, including Equinix, and as more organizations use generative AI, they’ll need more space in data centers.
On the date of publication, Marc Guberti did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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