Shares of Real Estate Investment Trusts (REITs) are ideal securities for income-oriented investors, and really for anyone interested in generating long-term total return from dividends and capital appreciation potential. One of my favorites is Realty Income (O), a REIT with a spotless history of dividend growth and exceptionally rich recent yield, reports John Dobosz, editor of Forbes Dividend Investor.
San Diego, Calif.-based Realty Income owns 13,100 retail, industrial, and agricultural properties leased to 1,300 tenants in 85 separate industries, allowing Realty Income to generate stable cash flow and deliver consistent monthly dividends. The current property portfolio includes high-quality real estate in all 50 states, as well as Puerto Rico, the United Kingdom, Spain, Italy, and Ireland.
Realty Income has paid steadily rising dividends over its entire 54-year operating history, and dividend growth has outpaced inflation by a comfortable margin. Realty Income has hiked its dividend 5.3% annually over the past 10 years, and 4.7% annually since its initial public offering in 1994. Dividends of $3.07 per year are comfortably supported by $4.22 in free cash flow per share over the past 12 months.
Realty Income’s revenue has grown 21.5% annually over the past 10 years and is seen rising 18% to $3.9 billion in 2023. Funds from operations are expected to increase 2% to $4.12 per share. At 13.5 times FFO, Realty Income trades 25% below its five-year average price/FFO multiple of 18.1. Debt is manageable at 63% of equity.
The value of Realty Income was compelling enough for Israel Englander’s Millennium Management to establish a new position of 1.28 million shares at a cost of $60.92 per share in the second quarter of 2023. Jim Simons of Renaissance Technologies bought 378,000 shares during the same period at similar prices. With smaller stakes, Clifford Asness of AQR owns 97,000 shares, and Ray Dalio’s Bridgewater holds 90,000 shares.
