What happened

Shares of Digital Realty (DLR 0.63%) slumped 26.6% in the first half of 2022, according to data provided by S&P Global Market Intelligence. That's a slightly bigger slide than the S&P 500, which fell 20.6% during that time frame. 

That sell-off in the broader market wasn't the only issue weighing on shares of the real estate investment trust (REIT) this year. 

So what

For the most part, Digital Realty is having a good year. The data center REIT released its first-quarter results in late April. The company delivered record bookings, driven by "strong demand for data center solutions," according to comments by CEO William Stein in the earnings report. That gave the REIT the confidence to reaffirm its full-year outlook for $6.80 to $6.90 per share in core funds from operations (FFO), which would be about 5% higher than last year's total at the midpoint.

That rising FFO enabled the REIT to continue boosting its dividend. Digital Realty gave investors a 5% raise in March, delivering its 17th straight year of increasing the payout. That kept it in a select group of REITs that have grown their dividend every year since their initial public offerings. 

Meanwhile, Digital Realty continued to take steps to expand its portfolio. The REIT acquired a majority stake in Teraco, a leading African data center provider. It also purchased more land in key global markets for future expansion. Digital Realty had an all-time high of 44 development projects underway across 28 markets worldwide, with 58% of the capacity already presold to customers, reflecting strong demand for data center space. 

However, despite all these catalysts, shares of Digital Realty tumbled in the first half of this year. That's due to some concerns about the company's growth prospects. Noted short-seller Jim Chanos told the Financial Times that he's betting against legacy data center operators as they face growing competition from tech giants like Amazon, Google, Oracle, and Microsoft, which are big customers of data center REITs. Chanos said he's raising several hundred million dollars for a fund to short Digital Realty and fellow data center REIT Equinix (EQIX -2.44%) because their customers are becoming bigger players in the data center space. 

Most analysts came out in defense of Digital Realty and Equinix. For example, JPMorgan analyst Richard Choe remains positive on the sector, noting that demand for capacity remains robust. As a result, the analyst sees significant growth ahead for Digital Realty and Equinix. 

Now what

Shares of Digital Realty have been under pressure this year due to concerns about the company's ability to keep growing. However, the data center REIT isn't seeing any slowdown these days, leading it to keep expanding. Because of that, it should be able to continue increasing its dividend in the future. With the stock now cheaper, and the dividend yield up to 3.9%, Digital Realty is an attractive option for income-seeking investors.