Income investors have had a challenging time over the last several years. With the S&P 500 on pace to close out this year at yet another all-time high, it continues to be a challenge finding stocks with sustainable yields. 

That doesn't mean it's impossible to discover quality, high-yield dividend stocks. One example is the real estate investment trust (REIT) STORE Capital (STOR). But just because it's a quality stock doesn't necessarily mean now is a good time to buy the stock. A few other factors need to be examined as well to see if the stock price qualifies. Let's dig into its fundamentals and valuation to see if this blue-chip REIT is a buy.

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Strong and improving operating fundamentals

Before going over its recent operating results, it would be helpful to gain a better understanding of the company's business model.

STORE Capital owns and leases out nearly 2,800 properties in 49 U.S. states to more than 500 tenants. All leases are under triple-net lease contracts, which means that STORE Capital's tenants are responsible for the expenses associated with the properties being leased. These expenses include property taxes, building insurance, maintenance, and utilities, as well as the base rent amount paid out to STORE Capital. 

There are two factors that make STORE Capital's business model even more attractive. The first is that the company's weighted average remaining lease term is 13.5 years, which should provide STORE Capital with a steady stream of revenue long-term. Secondly, the company's weighted average annual lease escalation is nearly 2%. When the company's leverage is adjusted for, this results in 2.5% annual adjusted funds from operations (AFFO) per share growth before considering reinvesting retained cash flows to acquire more properties. 

STORE Capital reported $0.52 in AFFO per share during the third quarter, which was a 13% boost over the year-ago period. Fewer properties under lease being closed (1.4% versus 1.9% in the year-ago period) due to the country learning how to live with COVID-19 was one catalyst for this growth. Another catalyst aside from the built-in lease escalations was that there was a 7.8% year-over-year increase in the company's property portfolio due to acquisition activity.

STORE Capital's admirable results in the third quarter were what led the company to raise its outlook for this year to a midpoint AFFO-per-share figure of $1.99. This is significant because it would represent a total recovery to pre-COVID AFFO-per-share levels.

And looking ahead to next year, STORE Capital anticipates that its lease escalations and continued property acquisitions will lead to $2.18 in midpoint AFFO per share. This is equivalent to a 9.3% growth rate over this year and 2019. 

A secure and market-beating payout

Since STORE Capital's 4.5% dividend yield is moderately higher than the diversified REIT industry average of 4.1%, it would be wise to assess whether the dividend is safe or at risk of being cut. 

Against the $1.47 in dividends per share that were paid this year, STORE Capital's AFFO-per-share payout ratio will be 73.6% at its $1.99 AFFO-per-share midpoint. This gives STORE Capital plenty of retained capital to execute future acquisitions and grow its AFFO per share. Such a payout ratio also leaves the company with a big enough buffer to withstand any temporary decline in its profitability.

This explains why STORE Capital was confident enough to hand out a 6.9% raise in its quarterly dividend to shareholders in September. Overall, the stock's dividend appears to be quite safe, while the yield is more than triple the S&P 500's 1.3% dividend yield.

The stock is priced reasonably for income investors

STORE Capital appears to be set up for an impressive 2022. But is the valuation enticing enough for income investors to buy the stock?

At its current $34 share price, STORE Capital is trading at a forward-AFFO-per-share multiple of less than 16. Given that STORE Capital can realistically compound its AFFO per share at a 6% rate annually for the foreseeable future, this appears to be a reasonable valuation. 

As a result, I would argue that STORE Capital is currently a buy for investors looking for immediate income that will almost certainly continue growing in the years ahead.