The highest Realty Income's (O -0.77%) stock has ever been was just shy of $80 per share, a peak hit in early 2020. And then the coronavirus pandemic upended the economy and the stock market, which fell into a bear market.
Unlike the price of the S&P 500 index (^GSPC 0.40%), which has rallied to new highs, Realty Income's share price hasn't recovered. It is still down roughly 25% from its high-water mark. But that's a big reason why long-term dividend investors may want to buy this industry-leading net lease real estate investment trust (REIT).
Realty Income has a high yield, a strong business, a great history
The big attraction for Realty Income right now is its lofty 5.5% dividend yield. The S&P 500 index is offering a scant 1.2%, and the average REIT has a yield of about 3.8%. Clearly, if you are looking to add some income to your portfolio, Realty Income will provide that.
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That yield is backed by a REIT with an investment-grade-rated balance sheet, a portfolio of over 15,600 buildings diversified by asset class and geography, and a dividend streak that spans across three decades. To be fair, Realty Income is a bit of a tortoise, with dividend growth over the past 30 years that averaged roughly 4.2%. But given the yield, that's not likely to be a problem for income lovers.
But why is the yield so high? The answer is that interest rates rose after the pandemic, which makes it more difficult for REITs to find profitable investments. More difficult, however, does not mean impossible. Once rates fall again (or property markets adjust to higher rates), Realty Income's growth will go from a snail's pace to the more normal tortoise-like pace. Buying now, while the stock is so far from its all-time high, gets you a big yield, a reliable REIT, and still-attractive recovery potential.
