Frederick Moran, Director of Research at Burke & Quick Partners, says he has an “outperform” rating on DuPont Fabros Technology, Inc. (DFT), which he believes is currently the best value in the group. He says the stock trades at a discount to the group at about 11 times next year’s AFFO of $2.80, and offers a 5.7% annual dividend yield.
“So it’s offering you a generous payout while you wait to see the stock perform more in line with the rest of the group and/or up to its potential as a result of a couple of issues overhanging the stock,” Moran says.
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One of the biggest issues hindering DuPont’s stock is the bankruptcy of Net Data Centers, a customer that accounts for 3% of DuPont’s revenue. Moran says the company curtailed most of its payments to DuPont a few months ago, but he thinks they are looking for a company to buy them.
“Once that takes place, they will re-lease the space from DuPont Fabros on reasonable terms,” he says. “If and when that happens, we think it provides a very positive catalyst for DuPont Fabros stock.”
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