Key Points
It has a resilient business model that does well in all kinds of economic conditions.
Its yield is more than four times the S&P 500's average.
It has paid a monthly dividend for 56 years.
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Many dividend stocks offer the safety and passive income that investors need to protect their portfolios in uncertain times. Whether you're looking for a safe stock or reliable passive income at all times, Realty Income(NYSE: O) is an excellent candidate.
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1. The resilient model
Realty Income is a real estate investment trust (REIT), and it's one of the largest in the world, with nearly 15,600 global properties. It's a retail REIT, which means it leases its properties to retailers, and it works with tenants that sell essentials, which is why they're largely resilient. More than 20% of properties are grocery and convenience stores, which can do well in any economy. Some of its top clients include Dollar General, BJ's, and Tractor Supply.
Even during the worst of the COVID-19 pandemic, when many stores closed their doors, and some couldn't pay their rent, Realty Income's occupancy rate fell to 97.9%. Today, it's 98.9%.
Over the past few years, Realty Income has entered new industries to expand its business and diversify. Today, retail accounts for almost 80% of the total, and it has a presence in industrials, gaming, and more. It's also moving more into Europe, and the U.K. accounts for nearly 15% of the total portfolio.
The company has a large pipeline of new properties to buy to keep it in growth mode, and it has a high selectivity rate to ensure quality. It sourced more than $500 billion in volume from 2019 through 2026 and deployed $72 billion in capital.
It also sees a $14 trillion addressable market, including new opportunities in data centers, which implies a long growth runway.
2. The high yield
REITs are a financial structure where companies pay 90% of their earnings in dividends, which is why you'll frequently see REITs in a great dividend investment portfolio. Realty Income's dividend yield is 5.3% at the current price, or nearly five times the S&P 500 average of 1.1%.
Dividend investors love high yields because they get a higher return on their investment, meaning their money works harder for them while they enjoy the passive income.
3. The long and reliable track record
Sometimes, a high yield can be a warning. Many of the top dividend companies offer a low yield because they're past their high growth stages and are using their earnings for operations. They have other attractive features, like growth and reliability.
Realty Income, though, has a long and reliable track record in addition to its high yield. It also has an extra, unusual perk: It pays the dividend monthly. It has been paying a dividend for 672 months, which translates into 56 years, without skipping a beat. That's under all kinds of economic conditions, indicating impeccable trust. Realty Income has also raised the dividend for the past 115 consecutive quarters, or more than 28 years.
Despite the challenging real estate environment, Realty Income continues to perform well. Adjusted funds from operations (AFFO), the standard bottom-line metric for REITs, increased 6.6% year over year to $1.13 in the first quarter, and its rent recapture rate, which is how much more it's getting for released properties, was 103.4%.
With this kind of performance, shareholders know they can count on Realty Income to continue providing passive income and creating long-term shareholder value.
Should you buy stock in Realty Income right now?
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income and Tractor Supply. The Motley Fool has a disclosure policy.
