So you’ve got $1,000 burning a hole in your pocket and you’re looking for a great stock to invest in with it. May I suggest Realty Income (O 1.17%)?
Why Realty Income? Well, I like it (and own it) for many reasons. Here are a few.
Image source: Getty Images.
For starters, it’s a real estate investment trust (REIT) — a company that owns lots of real estate, leasing it to tenants. REITs are required by law to distribute at least 90% of their taxable earnings as dividends, so they tend to be generous dividend payers. Realty Income’s dividend yield was recently a fat 5%. On top of that, the company has been paying its dividends for more than 650 consecutive months and has upped its payout 134 times in 32 years.
Today’s Change
(-1.17%) $-0.75
Current Price
$63.33
Key Data Points
Market Cap
$59B
Day’s Range
$63.31 – $64.21
52wk Range
$54.38 – $67.94
Volume
4.1M
Avg Vol
6.2M
Gross Margin
48.73%
Dividend Yield
5.11%
With a 5% dividend yield, a $10,000 investment today will generate $500 in annual income — and that payout will most likely grow over time. If it grows by 4% annually, you’re looking at about $740 in annual income in just 10 years.
Interestingly, while most dividend payers pay quarterly, this one pays monthly. That’s not necessarily a big deal, but if, say, you’re in retirement and relying on dividend income for much of your daily needs, it can be handy to have it coming in every month, along with your Social Security benefits.
Realty Income’s business model is appealing, too: It uses “triple-net leases,” which require its tenants to cover real estate taxes, property insurance, and operating expenses. In exchange, its tenants generally receive modest annual rent increases, often around 1%.
The company boasts a total compound annual return of 13.3% since it was listed on the New York Stock Exchange in 1994, and a 4.2% compound annual dividend growth rate since then, too. It has around 15,500 properties leased to tenants, and its top tenants include companies such as 7-Eleven, Dollar General, Walgreens, Home Depot, and FedEx.
While the company is able to grow organically, buying more properties with the income it generates, it’s also been spurring more growth via more creative means. For example, it has inked a $1 billion partnership with alternative investment manager Apollo Global Management — which will provide funding to buy more properties. It has other joint ventures, as well, and may keep adding more.
This should be a quite attractive portfolio candidate for any long-term investors seeking income. (Remember that it’s not just retirees who can use the income. Younger investors can always redeploy that money into more stock!) Give it some consideration — and perhaps consider some other compelling dividend payers, too.
