Doesn't everyone love a gift that keeps on giving? Stocks are always a great pick during the gift-giving season, but a stock that pays you monthly could be one of the best. That's exactly what Realty Income (O -0.17%) does -- and it's been making these monthly payments for many years.
Shares of the real estate investment trust have been under pressure lately amid high interest rates. But the Federal Reserve recently indicated that rates could be coming down. And Realty Income has a long and steady track record that should please investors.
Let's see why this could be just the stock to give yourself as a new year's present this season.
Gifting in perpetuity
Realty Income is a real estate investment trust (REIT), a business structure in which management pays out 90% of income as dividends. That's why REITs are often top dividend stocks, and any investor interested in passive income should consider REITs.
There are different kind of REITs related to the type of real estate they invest in. Realty Income is a retail REIT, because it owns properties that it leases to retailers, and it's one of the best retail REITs on the market.
One feature that makes Realty Income stand out is that it pays dividends monthly, which is especially appealing for people counting on passive income, like retirees. Realty Income has paid 640 monthly dividends (that's more than 53 years!) and has increased the dividend for 104 consecutive quarters. That's a hard track record to beat.
Realizing high ambitions
In its goal of becoming a top global REIT, Realty Income has expanded its portfolio by purchasing quality properties and acquiring other REITs. It acquired VEREIT in 2021, almost doubling its properties, which now number over 13,000. It's in the process of acquiring Spirit Realty, which will add another 2,000 properties to the total.
It sees plenty of opportunity to expand further, and it has the capital to do so selectively. It ended the third quarter with $3.4 billion of unused capacity, and it raised its full-year outlook to $9 billion in invested capital. It's the seventh-largest REIT globally, and it sees an $8 trillion total market of net lease properties worldwide, which it's amply prepared to tackle.
Since its recent acquisition, it has begun to diversify beyond its retail roots although retail still accounts for more than 80% of its tenant base. It has more than 1,300 clients in 85 industries, and it says that 91% of its tenants are in resilient industries. Its top three industries by tenant are grocery stores (11.4%), convenience stores (10.6%), and dollar stores (7.2%).
Realty Income works with large, stable industry leaders, and its top 20 tenants include Walgreens Boots Alliance, Walmart, and BJ's Wholesale Club. Portfolio occupancy is typically near 100% and has never been below 96%.
Image source: Realty Income.
A great price to boot
Realty Income stock is down 11% this year. It's been impacted by the high interest rate environment, which creates worries about tenants being able to make payments. There are also concerns about REITs being able to purchase new properties and make their own interest payments, as well as how higher interest impacts their bottom lines. That trickles down to investor pessimism about real estate-centered stocks.
However, Realty Income has been reporting strong performance. Same-store revenue rental growth was up 2.2%, and adjusted funds from operations (AFFO) per share increased from $0.98 last year to $1.02 this year. Management raised its full-year AFFO guidance.
The good news is that a lower price means a higher dividend yield and an excellent buy-on-the-dip opportunity. At the current price, Realty Income's dividend yields 5.4%. It's usually closer to 4.5%.
Realty Income is an excellent dividend stock for almost any portfolio, and it has a reliable, growing dividend that should pay you monthly for the foreseeable future. It's a great gift this holiday season.
