The specter of continued interest rate hikes has unfairly hit the stock prices of data center real estate investment trusts, CyrusOne Inc. executives said.
"Given our strong fundamental performance this quarter, as well as our peers', it's pretty astonishing that the REITs have fallen by 11% since the beginning of the year and the data centers by an even greater amount, which are down by about 16% since Jan. 1," President and CEO Gary Wojtaszek said on the company's fourth-quarter 2017 earnings call.
While rising interest rates are not helpful to REITs writ-large, the best way to combat them is through growth, Wojtaszek said, adding that data center REITs — CyrusOne in particular — are growing faster than the average REIT.
Cloud and enterprise companies outsourcing their data center needs to third-party operators and the growth of companies like Amazon, Microsoft, Oracle and Salesforce give the sector room to grow over the next several years, Wojtaszek said.
"Given where our stock price is currently trading, we are offering a 4% dividend yield and just provided 2018 EBITDA guidance of 25% growth this year as well," Wojtaszek said. "There are not many investment opportunities in the industry that carry this type of current cash yield with a very strong secular growth story attached to it, which is why I believe that the longer-term share price will continue to do very well."
CyrusOne's focus as a "low-cost" data center provider positions the company well against its competitors in a higher-interest-rate environment, Wojtaszek said, adding that a relatively healthy balance sheet will allow the company to lever up a bit and not issue equity at depressed stock prices.