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Goldman's 7 Best Financial Stocks for 2011

3. Digital Realty Trust (DLR - Get Report) is a real estate investment trust specializing in data centers.

Goldman is bullish on the data storage REITs due to "compelling data and cloud-driven IT demand trends coupled with lagging near-term supply growth." Digital Realty's scheduled to report fourth-quarter results Feb. 18. Its stock has climbed nearly 7% since Goldman added it to the Conviction Buy List, but still has 17% of upside potential. It is cheap relative to other REITs based on funds from operations. Its cash flow multiple of 15 reflects a 20% peer discount.

Since 2008, Digital Realty has grown sales, net income and earnings per share 29%, 30% and 61% a year, on average. Its stock delivered annualized gains of 14% over that span. Currently, 13, or 65%, of researchers advise purchasing the REIT, four say to hold and one recommends selling. The stock yields 3.9% and the distribution has grown 37% in the past 12 months. The payout has grown 20% and 15% annually, on average, over a three- and five-year span, respectively.

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