Last week, the Fed’s open market committee raised its benchmark interest rate by 0.75%, the largest such increase in almost 30 years. The move marks a shift to an aggressive stance against inflation, and an attempt by the Fed to head off a potential recession.
In fact, preliminary data leaked from the Atlanta Fed earlier in the week showed that the US is in a technical recession. While official numbers won’t be released until after the second quarter ends, the early numbers show that 2Q22 will end with 0.0% GDP growth. Following the 1.5% contraction in Q1, that’s two quarters in a row of negative or zero growth – the definition of a recession.
From an investor’s perspective, such an environment means it’s time shore up the portfolio’s defenses. Defensive stock plays are going to get a lot more attention going forward – as noted by Deutsche Bank in a recent report on current conditions.
Against this backstop, the investment bank’s analysts have picked out potential winners among the dividend stocks, the classic defensive plays for downturns of all types. We’ve looked up the details on two of those picks, using TipRanks’ database. Now let’s dive in, and look at the numbers and the DB commentary together.
Digital Realty Trust (DLR)
First up, Digital Realty Trust belongs to that long-time champion category of the dividend sector, the real estate investment trust (REIT). These companies are required to directly return a high percentage of profits to shareholders, and frequently use dividends as the vehicle. As a result, REITs can usually be relied on for reliable high-yield dividends.
Some REITs are generalists, investing in any sort of property, while others take a more narrow focus. Digital Realty is one of the latter, and its focus is on data centers. The company owns data center properties, and provides colocation and interconnection solutions between its properties and its tenants’ businesses. With a market cap of $36.2 billion, and an enterprise value of $56 billion, the company is the 7th largest REIT to be traded on Wall Street.