QTS Realty – Dilution does not alter outlook

Analyzing QTS Realty Trust (NYSE: QTS) is challenging given the brief history. A small market capitalization company in the data center REIT space, QTS was listed on the New York Stock Exchange in October 2013. A potentially larger obstacle is to build a great future, which is not an issue for QTS’s management, despite bumps in the middle of the road.

Q1 15 Performance

In their Q1 2015 earnings report released Monday, April 27, QTS announced that the March issuance of an additional 5 million shares diluted FFO. The midpoint 2015 Alternate FFO guidance was reduced from $2.29 per share to $2.12 per share. The total fully diluted shares and limited partnership units outstanding increased from 37.5 million to 42.8 million.

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However, this event did not alter much the price target for 2015. Price-to-FFO has been approximately 17 which is in between year-end price-to-FFO for 2013 and 2014 and close to its peers’ median. The company’s dividend yield of 3.5 percent is also on par with their peers’ median.

Based on the above information, QTS has been an average performer in the data center REIT sector.


2013 2014 2015P
Dividends declared per common share, $ 0.24 1.16 1.28
Q1 Dividend, $ N/A 0.29 0.32
Listed on the NYSE 10/9/2013
Dividend payout ratio, in percent 74.5 62.2
Weighted average shares – diluted (CS&OP) 36,794,215 37,133,584 42,812,502
Dividend yield, in percent 3.9 3.4 3.4
FFO, $ ‘000s 45,964 70,958
FFO per share, $ 1.25 1.91
Alternate FFO (Operating), $ 000s 49,512 74,145 89,200
Alternate FFO per share (Operating), $ 1.35 2.00 2.12
AFFO, $ ‘000s 47,408 69,236
AFFO per share, $ 1.29 1.86
Debt to Implied Enterprise Value, in percent 27.6 33.4
Revenues – Q1, $ 000’s N/A 48,943 61,386
Revenues – Q1, in percent N/A N/A 25
Share Price on 31 December, $ 24.78 33.84 37.48
P/FFO on 31 December (Alternate) 18.4 16.9 17.7
 2015P=2015 Projections

Source: QTS Realty Financials and Q1 2015 Presentation

Written by Heli Brecailo

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.​