How Realty Income Corporation Paid Out $3 Billion of Dividends

Realty Income recently announced it has paid $3 billion in dividends to its investors. But there is one thing that has allowed it to do so that often goes unnoticed.

Jun 17, 2014 at 2:22PM

This week, Realty Income (NYSE:O) announced it had surpassed the $3 billion mark in total dividends returned to shareholders. And there's one essential way it has managed to raise its dividend for 66 quarters in a row that often goes undiscussed.

The massive dividend payouts
In the announcement of passing $3 billion in dividends, the CEO of Realty Income said:

We are pleased with the company's consistent performance that has allowed us to pay over $3 billion in monthly dividends to our shareholders...we remain committed to operating our company in a manner that supports the payment of monthly dividends to our shareholders.

And a simple glance at how its dividend has risen over the last 20 years shows the remarkable growth:

Source: Company Investor Relations.

How it does so
So how has it so steadily risen its dividend through the years? Many people know one way is through acquisitions, as its real estate assets have ballooned from $339 million in 1994 to $9.3 billion at the end of March. The biggest jump came just last year when it acquired nearly 975 properties worth $4.7 billion: 

Source: S&P CapIQ.

But it turns out there's another way it boosts its dividend. The company's latest annual report noted plainly: 

We seek to increase distributions to stockholders and funds from operations, or FFO, per share through both active portfolio management and the acquisition of additional properties.

Acquisition of additional properties is easy to spot and understand. But active portfolio management is a bit more of a mystery. So let's examine what that means.

Active portfolio management
The portfolio management department of Realty Income is run by Richard Collins, who has been with the firm since 1990 and previously headed up the acquisitions group. So he knows a thing or two about seeking to increase the FFO that dividends are paid from. 

But what exactly does that portfolio management do? Let's check back in the annual report:

  • Contractual rent increases on existing leases;
  • Rent increases at the termination of existing leases, when market conditions permit; and
  • The active management of our property portfolio, including releasing vacant properties, and selectively selling properties, thereby mitigating our exposure to certain tenants and markets.

While it may be less glamorous than headline grabbing property acquisitions, portfolio management is the critical business function of a REIT to ensure properties are well maintained and continue to deliver topline results.

It examines both the broader performance of industries in which its tenants operate -- 47 separate ones at last count -- and it also monitors "the operation, management, business planning, and financial condition," of the individual tenants themselves.

Although the numbers aren't as large -- it expects $50 million in proceeds this year -- it also sells the assets Realty Income no longer needs. It will in turn use the money generated to invest in other properties that will likely yield higher returns, but also help eliminate the risks of become too concentrated in particular areas or industries.

The key takeaway
There's a lot to like about Realty Income, but a critical part of investing is understanding not only the glamorous aspects of a business -- like big acquisitions for REITs -- but all parts of it. And when you consider how well Realty Income has operated through the years, there's no doubt that while it may not be pretty, its portfolio management function has been one key to its success.

Are REITs the top dividend stocks for the next decade?
Dividends like those offered by Realty Income can be great things, as the smartest investors know dividend stocks simply crush their non-dividend paying counterparts over the long term. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Patrick Morris owns shares of Realty Income.. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers