The REIT is about to pay its dividend, which makes it the perfect time to exit ahead of what looks like another volatile summer, writes MoneyShow’s Jim Jubak, also of Jubak’s Picks.
Digital Realty Trust (DLR) will pay its quarterly dividend on June 29 to shareholders of record on June 15.
This real estate investment trust went ex-dividend on June 13. That means you’ll receive your dividend as long as you held on June 13. And you’re now free to sell without losing the dividend payment. I’m going to take advantage of that timing to sell Digital Realty Trust out of my Jubak’s Picks portfolio today.
The REIT has gained 1.23% in capital appreciation since I added it to the portfolio on March 23. The 73 cents a share in quarterly dividends (buying on March 23, I missed the March dividend payout with its record date of March 15) paid in June add another 1.01% in income to that return. The total return, then, comes to 2.25%.
Even in this market, I’m not about to write home about 2.25% in three months…but this pick did what it was supposed to do—it held its value (and a little more) and provided some yield while I waited to see where stocks might be headed. So why sell now?
- First, because I’d like to convert that store of value in Digital Realty Trust into cash that’s readily available for use, in case I get a too-good-to-pass-up buying opportunity as a result of this summer’s market volatility.
- Second, because the potential fallout from a failure to address the Euro debt crisis at this week’s European summit could take down even a dividend offering like this.
- And third, because on June 26, Digital Realty Trust announced that it would spend $1.1 billion to buy three data-center properties near London. And that to help fund the acquisition, it will sell 8.35 million shares in a public offering. That will add about 7.6% to the company’s 110 million shares currently outstanding.
I think that buying new properties that can be turned into turnkey data centers or that can be leased to companies looking to build out data centers is, in the long run, a good idea for Digital Realty Trust. Real estate prices are very attractive in European markets at the moment.
But in the short run, I don’t think I want to increase my exposure to the shaky economy in the United Kingdom. I think I’ll be able to re-buy Digital Realty Trust with lower risk—and maybe a lower price—in September or so.
And in the current market I’d like to have the extra flexibility that cash gives.