Over the past week, in anticipation of its Q4 results which are to be released this coming Thursday on February 4th, the rally for DuPont Fabros has been over 9 percent.
For a great part of 2015, DuPont was in the bullpen. CEO Christopher Eldredge was the one put in charge to contain losses after a top tenant declared bankruptcy. It is good news that the succeeding tenant seems to be doing quite a lot better and kept some of the storage space. Due to the issue, it is expected that the 2015 AFFO per share will go up by 6 percent in a sector in which competitors have increased by two digits.
Since the arrival of the new year, new forecasts have been put forth, and DuPont is expecting to experience a better year in 2016. Especially in the first years of his leadership, Eldredge does not wish to be left behind by its peers. Since the company might soon overcome last year’s issues, this could be the year that the company really thrives as things currently are looking rather favorable.
In comparison to its peers, DuPont has a great entry point, which is based on a 12x AFFO multiple along with a decent dividend of 5.7 percent. The dividend payout is set under 70 percent. Though it does not possess an investment grade rating as that of Digital Realty, the company’s ratio for debt to total capitalization is suitably under control.
Because of the fact of tenant concentrations, a risk premium should be added to the company’s valuation. The reason is that there is always the possibility of a corporate decision that will change the storage host or make a downgrade, even if they are not running out of money. More than half of the annual based rent is represented by Microsoft, Facebook, Rackspace, and Yahoo!.
The truth of the matter is that tenant concentration is a delicate issue, but I would not be surprised to see DuPont leave the bullpen sooner than most companies with the same issue.
What happened to make STAG Chief Financial Officer leave?
On Tuesday, STAG Industrial informed that CFO Geoffrey Jarvis left the company. I wonder if the unexpected exit has to do with the company’s challenging period. Because its share price dropped in 2015, the company has been unable to offer major issuance of equity. The management expects to grow assets by 25 percent annually. In 2016, the stock is currently down by 8.2 percent.
Source: Digital Realty Trust Inc.(NYSE:DLR), DuPont Fabros Technology, Inc.(NYSE:DFT), STAG Industrial, Inc.(NYSE:STAG), Fast Graphs, Yahoo!Finance.
Disclaimer: This is not a recommendation to buy or sell stocks. The highest-yield stocks are not necessarily the best portfolio investment choice. The purpose of this report — which is essentially a snapshot of information available on January 29, 2016 — is to reduce your stock analysis by enabling you to compare stock and sector performance. Please do your own due diligence before making any investment decision.
As of December 31, 2015, the equity REITs are constituent companies of the FTSE NAREIT All REITs Index. Companies whose equity market capitalization is lower than $100 million have been disregarded.
This report 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. 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.