The old trope is to pluck the leaves from a rose to find out if a person loves you or not. That's romantic, perhaps, but what a waste of time when you could, instead, be counting dividend checks. Which is exactly why Realty Income (O 0.52%) is way better than flowers or chocolate. So let's count the ways that this real estate investment trust (REIT) is what you should be giving your loved one come Feb. 14.
1. A generous yield
Who doesn't love cash? With regard to Realty Income, each share produces roughly $2.96 per share of the stuff a year. Based on the current stock price of $69, that's a roughly 4.3% yield. Historically speaking that's not huge for this REIT, but it's probably a pretty fair level given that the yield on the S&P 500 Index is a scant 1.3%; no paramour is going to accuse you of skimping.
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2. More than one
But here's the interesting thing about Realty Income: It pays its dividend monthly. So a gift of Realty Income stock isn't a one-time event like chocolate or flowers. You'll basically be giving the recipient a gift every single month of the year for as long as they own it. In fact, this frequency is so important to the REIT that it actually trademarked the nickname "The Monthly Dividend Company." You might want to use that nickname instead of Realty Income when you give the gift -- it sounds more impressive.
3. A regular hiker
And there's still more to love about Realty Income's dividend, given that this REIT is a Dividend Aristocrat. That's an elite club of companies that have increased their dividends annually for more than 25 consecutive years. It's a pretty incredible feat and shows that your loved one can rely on this dividend gift in both good years and bad. Realty Income's streak is up to 28 years... and counting.
4. A streak under a streak
But that's not the only record that Realty Income is working on. In addition to the annual run of dividend hikes, this landlord has also increased its dividend for 97 consecutive quarters. Effectively, your gift gets more and more attractive every quarter when you give Realty Income stock.
5. More than a dividend
Most people are going to focus on the dividend here, and for good reason. However, there's more to understand. For example, Realty Income is a net-lease REIT. That means the tenant is responsible for most operating costs. Any one property is a big risk, but over a large portfolio, net lease is a fairly low-risk approach to investing in real estate. Realty Income is the industry's largest net-lease REIT, with more 10,000 properties. Basically, this is a pretty flashy gift in the net-lease business.
6. Strong as a diamond
In addition to being the industry's bellwether name, Realty Income also has a rock-solid balance sheet. Being investment grade isn't unique, per se, but it does mean that the REIT has the financial bandwidth to deal with headwinds. Note that the annual and monthly dividend streaks survived 2020 when pandemic lockdowns caused many REITs to cut their payments. A strong financial core also allows Realty Income to get cheap access to capital, so it can more easily make acquisitions. So this is kind of a double benefit.
Not cheap, but worth it
As noted in point No. 1, the yield here has been higher in the past. However, that's a net benefit when it comes to acquisitions because a premium valuation helps to keep the company's cost of equity capital low. That makes growth easier to finance and helps support all of the other benefits noted above. Basically, this is one REIT that's well worth the price, even if you could find cheaper alternatives. But then why would you cut corners on Valentine's Day when such a great option is at your fingertips just waiting to show how much love you have to give, and give, and give?
