Digital Realty

Methodology

Digital Realty is a REIT where EPS has limited meaning—FFO (Funds From Operations) is the proper earnings metric for data center real estate. Depreciation distorts GAAP earnings while FFO better reflects operating cash generation from long-term colocation and interconnection contracts. Investors should use FFO-based valuation methods rather than traditional P/E ratios.

Methodology

PEG ratios based on EPS are inappropriate for Digital Realty—FFO growth is the relevant metric for REIT valuation. The data center REIT delivers mid-single-digit FFO growth from new development and rent escalations. Data center REITs trade more on implied cap rates and FFO multiples than earnings-based metrics given their infrastructure investment profile.

Methodology

Digital Realty pays a substantial dividend yielding 3-4%, making total return analysis critical, though PEGY using EPS remains flawed for REITs. The dividend represents most of FFO, providing stable income from mission-critical data center infrastructure. Investors should evaluate total return using FFO growth plus dividend yield rather than EPS-based PEGY calculations.