Investors are hungry for growth stocks now that the S&P 500 has been climbing. But don't forget your fundamentals.
For most investors, it's important to have a well-rounded portfolio with a mix of different kinds of stocks that can shield your portfolio and help it grow in any circumstances. That means dividend stocks, too.
If you're looking for a dividend stock that has it all, consider Realty Income (O -0.17%). It's high yielding, growing, and reliable. That makes it a no-brainer pick for almost any investor.
A winning real estate model
Realty Income is a real estate investment trust (REIT), a structure for companies that own and lease properties. They typically pay out 90% of earnings as dividends, which is why they make excellent dividend stocks.
There are different kinds of REITs that target different classes of tenants. Realty Income is a retail REIT, and it leases properties to large chain retailers.
Management touts its industry and tenant diversification as an advantage that breeds a secure cash flow, and its top tenants are well-known, established industry leaders. The company says 91% of its rent comes from tenants that are resilient to economic fluctuations.
Grocery stores (the No. 1 tenants) make up 11.4% of Realty Income's total properties, with convenience stores second at 10.6%, and dollar stores next at 7.2%. Its top three clients out of more than 1,300 are Walgreen's, Dollar General, and Dollar Tree, and its top 20 include Lowe's, Tractor Supply, and FedEx.
Realty Income recently entered gaming for the first time with the purchase of a Wynn Resorts casino with a favorable sale-leaseback deal. Realty Income inked a similar sale-leaseback arrangement with British grocer Sainsbury's, and these kinds of deals offer excellent terms for the capital-rich REIT to support its growth, cash flow, and expansion.
Many expansion opportunities
Expansion is high on the company's mind. It acquired VEREIT in 2021, almost doubling its property count, and it just closed its acquisition of Spirit Realty. It now owns more than 13,000 properties with a large pipeline for more.
Realty Income is the seventh largest global REIT, and it estimates that it has a $12 trillion market opportunity. That should keep it busy for many years.
The company typically has tens of billions of dollars in sourced acquisition potential, allowing it to be selective in its choices, and it had $4.5 billion in available liquidity at the end of the third quarter with which to make acquisitions.
The stock is down about 20% over the past year due to fears about interest rates and a suppressed real estate market. But management doesn't see it that way.
Realty Income says that it takes about a year for its average lease yield to adjust to changing interest rates, keeping its spread consistent. To its benefit, a suppressed real estate market presents attractive investment opportunities.
A top dividend stock
Realty Income is one of the few companies that pay a monthly dividend. It has paid it for 644 months and raised it for 105 consecutive quarters. At the current price, the dividend yields almost 6%.
Realty Income offers secure and growing passive income, and now is a great time to buy shares before they climb back up.
