Bell Potter says this ASX data centre stock has 15% upside and a 4% yield

If you are looking for both exposure to the booming data centre market and an attractive dividend yield, then it could be worth looking at the ASX stock in this article.

That’s because Bell Potter believes it could rise strongly and provide a 4.1% yield over the next 12 months.

Which ASX data centre stock?

The stock that Bell Potter is bullish on is DigiCo Infrastructure REIT (ASX: DGT).

Bell Potter notes that the company has announced the sale of its CHI1 data centre in Chicago for US$750 million. This represents a 5% premium to its purchase price.

In addition, it reiterated its FY 2026 guidance for A$125 million EBITDA.

The broker was pleased with the news and highlights three key positives. It said:

(1) Overhang removed, balance sheet scope – Following completion in 1QFY27, gearing will reduce to 17% on a pro-forma basis (was 36%) with proceeds used to pay down debt (net debt reduced by c.$1bn down to $0.5bn).

(2) Potential for capital return – DGT intends to explore capital management initiatives including distributing excess capital through “enhanced distributions in the short term above FFO. We assume upon completion in FY27.

(3) SYD1 update and plans – Reached practical completion for the first 15mw of the 20mw upgrade with remaining 5mw to be delivered prior to 30 Jun 26. We see an improved outlook for SYD1 acceleration given associated balance sheet scope and optionality post completion.

Should you invest?

According to the note, despite the ASX data centre stock rising 25% on Wednesday, Bell Potter sees potential for its shares to keep rising.

In response to the update, the broker has retained its buy rating with an improved price target of $3.40.

Based on its current share price of $2.95, this implies potential upside of 15% for investors over the next 12 months.

And, as mentioned at the top, Bell Potter is expecting a 4.1% dividend yield in FY 2026. It then expects yields of 6.8% in FY 2027 and 6.3% in FY 2028.

Commenting on its recommendation, the broker said:

Today’s announcement is a clear positive for DGT in removing balance sheet overhang given the substantial level of debt on foot, risk from increasing marginal cost of debt, and ability to fund its SYD1 development expansion which is its best use of capital given company-stated 15% incremental yield on cost.

While it is a deviation from potential capital partnering plans (ie partial asset stakes vs. 100% disposal), and should LAX be disposed (BPe end 1QFY27), leaves US operations as sub-scale (Dallas and Kansas remaining), we think the deeply discounted trading price was mostly a reflection of balance sheet concern. Subject to completion, and LAX asset disposals (US$71m book value) which are a drag on the balance sheet (non yielding), the pay down of debt, and usage into SYD1 improves the forward earnings profile which could see upside given the lack of Aus market supply short term.

The post Bell Potter says this ASX data centre stock has 15% upside and a 4% yield appeared first on The Motley Fool Australia.

More reading

• Why DigiCo, HMC Capital, Infratil, and Qantas shares are taking off today
• Why this ASX data centre stock is rocketing over 20% today
• DigiCo Infrastructure REIT slashes debt after Chicago asset sale

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.