Realty Income (O +0.87%) has evolved into a massive cash generator for its long-term investors. Known as the "monthly dividend company," it has paid a monthly dividend and increased its payout at least once per year since it initiated such payments in 1994.
Despite its gains, Realty Income's valuation and dividend yield appear well-positioned to benefit new investors. It may surprise investors how little of the stock they need to buy to generate $500 in annual dividend income.
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Generating $500 from Realty Income stock
As of this month, Realty Income's dividend pays $0.2685 per share monthly to shareholders, or just over $3.22 per share annually. At today's prices, the stock's yield is just under 5.6%. This means that to generate $500 in yearly income, one needs to buy 156 shares. At approximately $57.35 per share, that requires an investment of just under $8,950.
NYSE: O
Key Data Points
Realty Income derives revenue from just over 15,600 net lease properties. Under this arrangement, the tenant covers taxes, insurance, and maintenance costs, which stabilizes the company's cash flows.
The properties are almost 99% leased and occupied by stable, well-known companies, including Home Depot, Dollar Tree, and Tractor Supply. Those business's stability and dependence on foot traffic minimize the likelihood of tenant defaults.
Furthermore, investors should expect their dividend income to rise over time. Over the last year, Realty Income hiked its dividend four times. One year ago, the stock paid $0.2630 per share in dividends, meaning the payout rose by 2% during that time.
Admittedly, a 2% yearly increase sounds modest. Nonetheless, rising lease rates and an expanding portfolio should continue to drive the dividend and, by extension, the stock price higher, positioning Realty Income shareholders for improving returns over time.
