With a healthy dividend record spanning two decades, Realty Income (NYSE:O) belongs in everybody's income portfolio.
Moreover, with a focus on portfolio growth and cyclical macro headwinds, Realty Income has much more potential to grow its equity valuation-and its dividend.
Outstanding year-to-date return
2014 was clearly a good year for Realty Income, and its shareholders. With a total return of more than 21%, Realty Income has managed to reclaim a lot of ground which was lost during the REIT sell-off in May of last year.
Though Realty Income is now quoting near its 52-week High of $46.05, the commercial REIT has further potential to increase its shareholder value.
1. Increasing dividends
Realty Income is a dividend champion, pure and simple. With 527 paid dividends and 76 dividend hikes since its public market debut in 1994, the company has positioned itself as a reliable dividend payer.
And, more importantly, a consistently rising dividend stream suggests that management should be able to deliver further dividend increases down the line. There is nothing that creates more confidence in the future of a company than a management team that has solid execution skills and can present investors with a convincing dividend record.
In addition, Realty Income has hiked its dividends in every year, including during periods of market distress. During the financial crisis, for instance, Realty Income has consistently increased its dividend payout, signalling to the market that it can withstand serious economic headwinds.
2. Quality stock
Pretty much related to the first theme, Realty Income is a quality stock. And quality will always be in demand.
Besides, even though Realty Income's stock price has risen more than 21% this years, investors still get to benefit from an approximately 5% yield which indicates that Realty Income has not become too expensive yet.
3. Expanding US economy
With U.S. unemployment standing at 6.3% and still sluggish domestic GDP growth, we are years away from a solidly booming U.S. economy. Being in the expansionary phase of the business cycle, the U.S. economy has much more potential to grow in the coming years. The asset classes benefiting the most? Real estate and equities.
With cyclical tailwinds from higher U.S. growth and higher demand for both residential and commercial real estate, Realty Income should experience a significant boost to the value of its property portfolio.
Though stock market indices quote near all time highs and Realty Income's stock has had a good run in 2014, the dividend champion has much more potential to deliver higher returns for shareholders.
Cyclical tailwinds benefiting the real estate asset class, a convincing quality dividend record and a great yield suggest that Realty Income will continue to be in high demand.
Top dividend stocks for the next decade
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Kingkarn Amjaroen 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.