The Ultimate Dividend Growth Stock to Buy With $1,000 Right Now

Are you looking for a great dividend-paying stock you can buy right now and hold on to indefinitely? Proven income-generating names like Coca-Cola and Duke Energy are always viable options.

If you’re looking for a name that’s not only built to last but also built to seriously grow its dividend payment, however, consider something that’s already well established in a young industry that’s also poised to grow – a lot – for the foreseeable future … a name like Equinix (EQIX 0.16%).

Image source: Getty Images.

What’s Equinix?

It’s not a household name. But there’s a very good chance you or someone living in your household regularly benefits from its service. Equinix operates more than 270 data centers in 77 different locales, serving over 300 Fortune 500 companies. It did $9.2 billion worth of business last year, turning $1.35 billion of that into net income, and extending single-digit-but-steady growth that’s been in place for nearly three decades now.

Perhaps more relevant today, Equinix offers a whole lineup of artificial intelligence (AI) solutions like AI training (including inference), autonomous service agents, and more. This, of course, has been and should remain a major growth driver. An outlook from Precedence Research suggests the worldwide AI data center industry is poised to grow at an average annualized pace of more than 27% through 2035.

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NASDAQ: EQIX

Equinix

Today’s Change

(-0.16%) $-1.57

Current Price

$969.90

Key Data Points

Market Cap

$95B

Day’s Range

$962.64 - $983.38

52wk Range

$701.41 - $992.90

Volume

512K

Avg Vol

633K

Gross Margin

31.50%

Dividend Yield

1.98%

However, this tailwind isn’t the only reason you might want to consider stepping into this stock while its forward-looking dividend yield stands at 2.2%. It’s not even the crux of the reason; 2.2% isn’t an especially high yield anyway. Neither is its 11 consecutive years of per-share payment growth.

Rather, Equinix is a compelling income prospect because it’s structured in such a way that’s ideal for the nature of the business it’s in.

The ideal structure for this business, and this goal

That structure is a real estate investment trust, or REIT, for short. While REITs trade on stock exchanges, these are actually companies that own revenue-bearing real estate. This real estate is typically properties like apartment complexes, office buildings, or shopping centers. It can also be data centers, though, which similarly produce recurring monthly income.

REITs enjoy a distinct advantage that most conventional companies don’t. That is, as long as at least 90% of any profits are passed along to shareholders in the form of dividends, it isn’t first taxed at the corporate level. They must pay out most of their earnings as dividends, in fact, to maintain their tax-friendly classification. This ultimately means REIT owners get to keep more of whatever recurring rent-based profits the underlying company is producing.

And Equinix is certainly producing plenty of both. Of last year’s per-share adjusted funds from operations (AFFO) – a measure similar to non-GAAP (adjusted) income for conventional companies – of $38.33, $18.76 was distributed as dividends. These numbers were up 9% and 10% year over year, respectively, easily outgrowing the sort of dividend growth you’d be getting from the aforementioned Duke Energy or Coca-Cola. Indeed, you’d be hard-pressed to find more dividend growth from_ any_ investment option with a similar low-risk profile.