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Data Center & Digital Infrastructure REITs: 5 to watch for steady income

Data centers and towers are the plumbing of the internet. Every search, stream, and AI prompt runs through buildings full of servers and the antennas that connect them. For dividend investors, this niche blends long leases with durable demand, a combination that can steady a portfolio when markets chop around.

Power demand tied to AI has become the story of 2025. New data halls are being planned around substation timelines, not landlord optimism. In practical terms that means the best operators have more bargaining power on pricing and pre-leasing, which supports cash flow visibility. That backdrop also favors owners that can fund growth without stretching payout ratios.

Towers sit on the other side of the same trend. Carriers keep paying rent escalators for space on poles and rooftops as networks densify. Churn is low and contracts are sticky. The result looks a lot like the cash profile of a regulated utility, only with lighter assets and international diversification at some operators.

This mini-basket uses three data center names and two tower REITs to capture the theme without overconcentrating in any one business model. It is meant as a building block inside a dividend portfolio, not as a standalone bet. If rates drift higher, these remain rate-sensitive, so position sizing matters.

What this niche is and how it pays

Data center landlords lease square footage, interconnection, and power to cloud platforms and enterprises. Contracts typically run multiple years. Rent escalators and cross-connect fees add up quietly in the background. The current limiter in several metros is power rather than tenant demand, which gives scaled owners an edge because they can line up utility capacity earlier and build in phases.

Tower REITs lease vertical real estate to carriers and private networks. The unit of value is the space and load on each structure, which can support several tenants per site. Revenues grow with escalators and occasional amendments as customers add equipment. Expenses are relatively modest once a site is built, so incremental margin is high and predictable.

For dividend investors the key is the relationship between cash generated per share and the dividend paid. In REITs we look at AFFO per share, not net income. The healthiest payers in this group run payout ratios that leave a cushion to fund new builds and absorb rate moves. You will see that dynamic most clearly at the global leaders.

The payout math today

Yields in this niche cluster in the low-to-mid single digits. That is lower than a high-yield pipeline MLP, but the tradeoff is a runway for dividend growth that tracks steady AFFO expansion. The big question is always coverage. You want a dividend you can hold through a cycle, not one that depends on cheap capital or a hot leasing quarter.

Among data centers, Equinix continues to target a payout around half of AFFO per share. That leaves meaningful reinvestment capacity while still growing the check. Digital Realty runs a higher payout because it leans harder into development. That can produce attractive growth when projects deliver on time, though it tightens the margin for error if rates jump. Iron Mountain sits in the middle. Its legacy storage business throws off dependable cash that supports the dividend while funding a measured expansion in data centers.

On towers, American Tower has kept dividend growth steady with escalators and a disciplined balance sheet. Its payout sits in a comfortable zone for a capital-light model, and it has tended to raise in small quarterly steps. Crown Castle is the outlier after its reset earlier this year, which right-sized the dividend to match a refocus on core towers. Management’s stated goal is to hold a payout ratio that fits long-term AFFO, then rebuild from there as the portfolio settles.

The through-line is this. If you can live with a starting yield around two to four percent, you can own a cash stream that has room to grow. If you need a higher starting yield, you can tilt toward the tower name that reset its dividend, with the understanding that the growth path may be flatter until the refocus is complete. Either way, coverage should be the first check, and the quarterly guidance tables are your best friend.

Five names to watch

Equinix (EQIX). The global interconnection leader. Tenants value the ecosystems inside its campuses as much as the square footage, which makes move-outs less likely and pricing power a bit sturdier. The dividend runs through a consistent quarterly cadence and management targets an AFFO payout near one-half. That approach absorbs rate noise and still leaves room for new capacity tied to AI demand.

Digital Realty (DLR). A scaled operator with an AI-tilted pipeline. The company continues to balance pre-leasing commitments with development spend, which lifts Core FFO but also keeps the payout ratio in a higher band while projects are in flight. For income investors, the watch items are mix of funding, timing on power delivery, and the path to harvesting rents from new campuses. When that machine clicks, cash conversion improves and the dividend coverage widens.

Iron Mountain (IRM). A hybrid. The legacy boxes-and-paper business still matters because it throws off durable cash with sticky customer relationships. Management has directed more of that cash toward a growing data center platform, which gives the company a second engine. The payout sits at a level that reflects both the stability of storage and the capital needs of expansion. If you want a touch more current yield without abandoning growth, this is often where it comes from in the basket.

American Tower (AMT). A global tower owner with a highly repeatable model. Contracts include built-in escalators that show up like clockwork, and the company has tended to adjust the dividend in small, frequent steps rather than big annual jumps. The balance sheet and international diversity help smooth single-market hiccups. For a lot of income investors, this is the core tower holding because coverage is strong and visibility is good.

Crown Castle (CCI). A U.S.-focused tower operator that reset the dividend after choosing to move past fiber. The new policy aims for a payout that fits long-run AFFO, then builds from there. In practice that means a higher starting yield than peers today, coupled with a transition period as asset sales close and the tower portfolio takes center stage. If you can accept steadier rather than rapid dividend growth in the near term, it can round out the tower side of the mix.

How to put it to work

Start with two or three positions. Pair one data center landlord with one tower REIT so your income draws from both sides of the digital backbone. If you want a bit more current yield without giving up growth, add the hybrid with storage cash flows. Keep position sizes moderate because the group still trades with interest-rate moves, and you do not want the sleeve to dominate your portfolio’s rate sensitivity.

Re-check coverage every quarter. The math is simple. Pull each company’s investor materials, find AFFO per share guidance, and divide the annual dividend by that number. You want breathing room. If coverage tightens because of a project delay or a surprise in rates, consider whether it is a temporary issue or a trend. Let the numbers, not the narrative, guide conviction.

Be deliberate with timing. These names can swing around earnings and rate headlines. Stagger entries over a few weeks rather than buying all at once. If you care about qualified dividend timing, map ex-dates, though the long-term driver here is growth in AFFO and rents, not a single quarterly check.

Finally, set expectations. This niche is not a 7–8% income machine. It is a quality-first sleeve where yield meets growth, and where dividend durability matters as much as the starting number. That tradeoff has paid off for long-term holders because cash flows have tended to rise with network demand, and because well-capitalized players can invest through cycles rather than pulling back at the wrong time.

What could go wrong

The two variables that matter most are rates and power. Higher rates pressure REIT multiples and make development hurdles tougher. You can’t control that, but you can size the sleeve so it does not overwhelm the portfolio’s interest-rate exposure. Power and permitting sit on the operational side. Substation timelines and local approvals can push projects to the right, which delays the moment when rent starts flowing. Favor operators that secure power early and build in phases to reduce that risk.

Towers carry their own watch items. Carrier budgets ebb and flow. Churn can tick up when networks consolidate or when customers reprioritize capital. The large tower owners have lived through these cycles before, but it is worth following leasing updates and guidance on amendments because those small items compound over time.

The last point is valuation. In hot tape, multiples expand quickly and push down starting yields. When that happens, the best move is usually to be patient and keep a watchlist rather than chase. Income investing rewards discipline more than speed.

If you are building a dividend sleeve that still wants growth, data centers and towers deserve a place. They are core infrastructure for the digital economy, they pay you to wait, and the stronger players have the balance sheets to fund growth without starving the dividend. Start small, let coverage and execution earn larger weights, and give the position a few quarters to do its work. 

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