If you spot a company with an operating history spanning several decades that shows consistent growth in sales, profits, and dividends, it's certainly something you should consider buying, suggests John Dobosz, editor of Forbes Dividend Investor.
It's impossible to fake long-term reliability. If you can pick up a stock like this with valuations more modest than historical averages, it's probably worth your coin.
Based in Escondido, California, Realty Income Corp. (O) is a real estate investment trust that owns more than 3,900 commercial properties owned under long-term lease agreements with regional and national retail chains.
Since its inception in 1969, it's paid 525 consecutive monthly dividends, hiking them 75 times since going public in 1994. The dividend is currently good for a 5.36% annualized yield.
Realty Income shares are down 8% from a $44.50 high in late February. The REIT is looking cheap lately for a couple of reasons.
One is the weakness in retail, but another, more company-specific factor, is the recent 12 million share secondary stock offering, priced at $39.96. The capital raised will be used to fund acquisitions, a strategy that has delivered impressive growth over the past several years.
An additional reason that the market has been less than charitable of late with O is the prospect of higher interest rates, which diminish the value of income-oriented investments like bonds, and high-yield, low-growth companies like utilities.
Hardly a slow grower, Realty Income's revenue is expected to climb 13.7% to $885.25 million this year. Earnings are forecast to grow 6.6% to $2.57 per share.
Valuation is flashing a discount to historical averages. The average price-sales ratio over the past three years has been 11.62 times trailing 12 months of revenue.
Multiplying 11.62 times $4.08 in sales per share gets you a $47.40 stock price. That's a nice score from around $41 now, plus you get paid well, every month, while you wait for those capital gains to materialize.
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