The world revolves around data these days, doesn’t it? And that’s the common thread that ties these four companies (and thousands of others) together.

I just got a whopper of a home internet bill from AT&T. It seems we went over our allotted 150 monthly gigabytes of data usage. For perspective, that’s enough to download 1,000 MP3 songs, watch 1,000 YouTube videos, browse 10,000 web pages or watch 25 high-definition movies.

Yet, we needed more – which AT&T is happy to provide, in 50-gig increments for $10 each.

Personally, I don’t access the internet much outside of work. But I’m definitely in the tiny minority there. According to cellphone maker Ericsson, mobile data traffic has soared by nearly 80%. And with 5G service now deployed in most cities (supporting blazing-fast download speeds 100 times faster than 4G), it’s expected to surge another five-fold by 2024.

More And More Data Every Day…

To know where we are going, it helps to first see where we’ve been. In 1992, global internet traffic was a mere 100 gigabytes per day. By 1997, usage was up to 100 GB per hour. And by 2002, it stood at 100 GB per second. Today, usage exceeds 50,000 GB per second. In a single day, the world makes 5 billion online searches and sends 294 billion emails.

Snap your fingers. In that brief instant, more data flowed around the world than was sent in an entire year back in the mid-90s. And by 2022, global internet traffic tripled again to 150,000 GB per second.

And it’s only going to grow from here. Multiple trends are fueling this growth. One is the cord-cutting phenomenon, where viewers are canceling cable or satellite service in droves and watching television over the internet instead. Another is the proliferation of internet-connected devices – the internet of things (IoT) – such as smart utility meters and front door video surveillance systems.

More devices, wider bandwidth, larger files, richer graphics, faster download speeds. It’s a recipe for mind-boggling data consumption. Here’s what it boils down to…

This Is A Huge Opportunity

As you might imagine, it takes considerable infrastructure to make all this possible. And that means opportunity for investors. Cell tower owners are one possible option. But think bigger.

The greater the world’s appetite for data, the fiercer the demand for data centers.

Racks upon racks of servers and other hardware take up a lot of floor space. They also draw exorbitant power and need cool environments to keep from overheating. Most IT departments have found that instead of keeping all this equipment in-house, it makes financial sense to rent space in a dedicated facility called a data center.

Numerous renters typically occupy a single building known as a colocation center (or “carrier hotel”). There are plenty of interested parties ranging from tiny website hosting companies and online retailers to colossal data storage providers and telecoms.

Once the hardware has been installed on these campuses, renters are reluctant to move – and not just because of the hassle and expense. They often make connections with neighbors. Furthermore, every minute of website downtime can mean millions in lost revenues, so companies are reluctant to do anything that could disrupt network availability.

That switching cost is powerful competitive advantage for incumbent leaders.

Needless to say, renters want full assurance that their data and mission-critical operations are protected. These data centers have redundant backup power generators, advanced fire protection systems and other safeguards. Many are also equipped with biometric scanners and other security systems. Shared infrastructure means lower costs for renters. And there are other advantages… reduced IT staffing, ample bandwidth, ultra-high reliability up to 99.9999% (downtime measured in minutes per year).

Closing Thoughts

Demand for data-center space has grown at a rapid clip around the globe, fueling strong returns for the companies that own these specialized properties.

There are a few ways to play this trend directly — but not as many as you might think. They all operate as real estate investment trusts, or REITs for short.

Here are three standouts: Equinix (Nasdaq: EQIX), Digital Realty Trust (NYSE: DLR), and Iron Mountain (NYSE: IRM).

As a refresher, most REITs own some form of real estate and make money by renting these spaces to individuals or businesses. (Although some REITs also earn interest on real estate securities, such as mortgage bonds.) REITs are required by law to pay out 90% of their income as dividends to shareholders, and are not subject to corporate income tax.

All three of these REITs offer market-beating yields (along with considerable upside).

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