Is The Huge McGraw Hill Financial Data Center Deal Just the Tip of the Iceberg for QTS Realty Trust?

Just after the closing bell on July 2, 2014 QTS Realty Trust released a stunning two-part announcement regarding a strategic partnership with Atos SE, an international IT services company, as part of a blockbuster data center deal with McGraw Hill Financial, . Quite frankly, both parts of this announcement are huge deals.

Most investors are more familiar with $22.8 billion cap McGraw Hill iconic brands such as:

  • Standard & Poor's Rating Services
  • S&P Capital IQ
  • S&P Dow Jones Indices
  • J.D. Power
  • McGraw Hill Construction

Data has been the heart and soul of this information and analytics powerhouse dating back as far as 1888. Selecting QTS Realty as the company to own and operate such a mission critical facility certainly will send a shockwave throughout the entire data center REIT sector.

Why do companies outsource?
Large enterprises are faced with the challenging task of deciding how to securely store and ultimately use this data as a profit center to grow earnings. Data center REITs provide outsourcing solutions for areas that are not part of their customer core competencies such as: security, compliance issues, climate control, connectivity, resilience, and how to best provide reliable yet cost effective power. Green power may be an important consideration as well.

All data centers are capital intensive to build and own. Is that capital that would be better served deployed in core business initiatives? Probably.

A relationship with a large data center REIT aids in planning for disaster recovery and quicker deployment of new initiatives. The list is almost endless, and I have yet to use the word "cloud," or "hybrid" even one time!

A rising tide lifts all boats
CyrusOne CEO Gary Wojtaszek recently shared that approximately 90% of all the data in the world has been created in just the past two years. This is not a trend which is expected to change anytime soon, in fact it is likely to accelerate.

the gutsy little company IPO in Oct. 2013 to the 800lb gorilla I had envisioned back in March, 2014.

Income investors may prefer Digital Realty's proven dividend history, and current 5.7% yield. Digital Realty currently provides investors with a way to profit from international data growth. On the other hand, many investors may be more attracted to small-cap QTS' long-term growth potential -- plus a dividend currently yielding 4%. That happens to be my pick moving forward.

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The article Is The Huge McGraw Hill Financial Data Center Deal Just the Tip of the Iceberg for QTS Realty Trust? originally appeared on

Bill Stoller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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