Realty Income Seizes a $1 Trillion Data‑Center Opportunity with a 5 %+ Dividend Yield

Key Points

• Realty Income has recently formed a $6 billion joint venture to invest in data centers.

• It identifies a $1 trillion investment opportunity in the sector.

• Data‑center investments are expected to support the REIT’s continued dividend growth.

• 10 stocks we favor over Realty Income 

AI data centers have become the most talked-about investment theme. From developers to chipmakers to power producers, market participants are racing to participate in the AI data‑center boom, driving up valuations and accelerating upside potential.

While many investors focus on speculative plays tied to the AI race, a more stable avenue for participating in Stories field: Realty Income (NYSE: O) already holds a stake in the data‑center economy. This positions the REIT for steady, more-than-5 % monthly dividend growth.

In late 2023, Realty Income launched a build‑to‑suit joint venture (JV) with Digital Realty, purchasing an 80 % interest in a JV intended to build up to 48 MW of data‑center capacity. The JV is secured by long‑term net leases with high‑quality tenants, and the total build‑out cost is capped at $800 million.

More recently, the REIT entered a larger JV with Cloud Capital to invest in hyperscale data centers. This new partnership will initially hold over $6 billion in assets, with Realty Income contributing up to $1.4 billion for a 45 % stake in a three‑property Northern Virginia portfolio. The JV will enable further development and acquisitions in the U.S. and Europe.

These joint ventures position Realty Income to capture a share of the more than $1 trillion opportunity it sees in global data‑center investment—an attractive prospect for an $89 billion REIT by enterprise value.

Accelerating Growth

The $6 billion hyperscale JV is already boosting the REIT’s performance. Realty Income has increased its adjusted funds from operations (AFFO) outlook to $4.44–$4.45 per share (from $4.41–$4.44 previously) and raised its investment outlook to $10 billion (up from $9.5 billion).

With an expected adjusted free cash flow of over $965 million this year—after dividend payouts—the REIT has ample capacity to continue raising its dividend. The company has also extended its dividend growth streak to 115 consecutive quarters.

A Lower‑Risk Way to Participate in the AI Data‑Center Boom

Unlike speculative AI‑related stocks, Realty Income invests in well‑underwritten properties backed by long‑term leases with top‑tier tenants. The REIT’s over‑5 verlaten monthly dividend and steady growth make it a lower‑risk vehicle for capitalizing on the data‑center wave.

Image source: Getty Images.

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