In today's thriving stock market, investors could easily get caught up in the artificial intelligence (AI) revolution and lose sight of the safe stocks and dividend payers that are anchors. But safe, income producing companies are crucial to a secure portfolio that can withstand whatever happens in the market.
Right now, the S&P 500 continues to hit new highs, and it's up 19% over the past year. A strong economy and declining interest rates should keep these trends going.
But after three years of double-digit gains, there's a good chance that things could change this year. And even if they don't, it will happen eventually. You should make sure you have some dividend-paying value stocks that could help protect your portfolio under adverse circumstances, even if you're mostly growth focused.
Realty Income (O +1.00%) is a reliable, top dividend stock with many benefits for the long-term investor, and here are three reasons to add it to your portfolio.
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1. It's resilient
Realty Income is a real estate investment trust (REIT), and as such, it must pay out 90% of earnings as dividends. REITs own properties that they lease to long-term tenants, and they typically are focused on specific industries, like data centers or energy.
But Realty Income leases its properties to major retailers like Walmart, Home Depot, and Dollar General. These are predominantly large, established chain stores with high sales that reliably pay their rent. More than 20% of the REIT's portfolio are grocery and convenience stores, companies that sell essentials and can survive under any conditions.
Although 80% of its portfolio is in retail, however, Realty Income has expanded into other sectors, including industrials and casinos. It's also buying more properties in Europe, and today, U.K.-based grocer Sainsbury's and general retailer Tesco are both top 20 tenants. These moves diversify the company's holdings and provide more security for its business model.
Realty Income stock has come under some pressure because of the poor real estate environment. But the company is performing well, with $1.08 in adjusted funds from operations (AFFO) per share in the third quarter, up from $1.05 last year. That's the standard metric to assess earnings for REITs. Over time, its AFFO has a compound annual growth rate of 5%.
2. It has robust growth opportunities
REITs typically grow through purchasing new properties or acquiring smaller REITs. Realty Income has done both over the years, and today it has about 15,500 properties worldwide.
NYSE: O
Key Data Points
Even in the pressured climate of high interest rates, Realty Income has been buying new properties, and it has a large pipeline as well as capital to make purchases. Realty Income estimates its global market opportunity at $14 trillion, and as of the end of the third quarter, it had nearly $100 billion in sourced acquisition opportunities.
In fact, pressured moments like these might end up working in the company's favor, since the prices of commercial real estate in many large cities has come down.
3. It has one of the best dividends in the market
Realty Income has an excellent payout with all the features that dividend investors love. The healthy business implies that it can pay the dividend, the dividend is growing, and it has a high yield: 5.4% as of Jan. 14.
The company also has several features that make it stand out. For one, it pays its dividend monthly, putting passive income in your pocket more frequently. Next, it has paid the dividend for 667 months consecutively -- that's more than 55 years, making it incredibly reliable. Lastly, it has raised the dividend for 113 straight quarters, or more than 28 years. That's a raise four times every year.
Realty Income is a dividend stock you can rely on to provide protection and passive income now, under challenging circumstances and for the foreseeable future.
