Image Shown: CyrusOne, an idea in the High Yield Dividend Newsletter portfolio, announced it was getting bought out on November 15.
By Callum Turcan
CyrusOne (CONE), a data center real estate investment trust (‘REIT’) included as an idea in the High Yield Dividend Newsletter portfolio, announced on November 15 that the private equity firm KKR & Co Inc (KKR) and the infrastructure investment fund Global Infrastructure Partners (‘GIP’) is buying the REIT for $90.50 per share in cash.
Overview
According to the press release, the ~$15 billion deal (including the assumption of debt) is expected to close by the second quarter of 2022 and has already been unanimously approved by CyrusOne’s board of directors. CyrusOne’s shareholders still need to approve of the deal, which we view as likely given that KKR and GIP are offering a roughly 25% premium based on CyrusOne’s closing stock price on September 27 before buyout rumors started spreading in public. Shares of CONE yield ~2.3% as of this writing.
Back on October 13, we published a note titled High-Yield Idea CyrusOne Considers Selling Itself (link here) and are pleased that the buyout rumors came true. To view why we thought a sale was likely, please check out that article.
We are glad to have gotten this idea out front and center for our members and continue to be huge fans of the data center space. Digital Realty Trust Inc (DLR), another high-quality data center REIT, is included as an idea in both our Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio, and shares of DLR yield ~2.9% as of this writing. To read more about our thoughts on Digital Realty please check out our October 2021 article Digital Realty Boosts Guidance and Further Extends Growth Runway (link here). Shares of CONE and DLR both surged higher during regular trading hours on November 15.
Concluding Thoughts
In our view, the High Yield Dividend Newsletter portfolio is well-positioned to navigate any potential increases in interest rates in the face of ongoing inflationary pressures. Please note that as the yield on the 10-year U.S. Treasury remains relatively low (around 1.6% as of this writing), it appears that investors do not expect interest rates to rise at a brisk pace over the medium term.
The Fed recently announced it was winding down its QE program and monthly purchases of US Treasuries and mortgage-backed securities (‘MBS’) are set to end by the middle of next year. In any event, Digital Realty should be able to grow its cash flows at a robust pace going forward, aided by powerful secular tailwinds as data consumption continues to surge around the globe in the face of the proliferation of cloud computing operations, the Internet of Things (‘IoT’) trend, and the emergence of the autonomous vehicle industry.
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Real Estate Investment Trust Industry – CONE, DLR, FRT, O, REG, SPG, WPC, PEAK, HR, LTC, OHI, UHT, VTR, WELL, PSA, EQIX, CUBE, EXR, IRM
Tickerized for CONE, DLR, KKR, VNQ, AMT, COR, VPN, DBRG, EQIX, IRM, UNIT
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Callum Turcan does not own shares in any of the securities mentioned above. CubeSmart (CUBE), CyrusOne Inc (CONE), Digital Realty Trust Inc (DLR), Public Storage (PSA), and Vanguard Real Estate Index Fund ETF (VNQ) are all included in Valuentum’s simulated High Yield Dividend Newsletter portfolio. Digital Realty Trust Inc and Realty Income Corporation (O) are both included in Valuentum’s simulated Dividend Growth Newsletter portfolio. Some of the other companies written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.