There are plenty of high dividend yields in the stock market, but the number of companies that can pay and increase their dividends for decades is few and far between.
So, if you find one, it's best to stick close to it. The key to finding good dividend stocks is to look for companies with solid business models that have strong earnings and free cash flow growth to pay and increase their dividends each year.
If you are looking for $1,000 in annual passive income, investors should consider investing $20,700 in this rock-solid dividend stock.
A solid triple net lease model
Realty Income (O +0.68%) is a real estate investment trust (REIT), which means it doesn't have to pay corporate taxes if it meets certain conditions, such as distributing 90% of taxable income to shareholders through dividends, and it derives a certain amount of income from real estate activities, and having a certain amount of assets in real estate, cash, or bonds.
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Realty Income also operates on a triple net lease model, meaning it leases properties to companies that are then responsible for rent, property taxes, and other expenses, such as insurance and maintenance. In return, companies may be able to negotiate longer leases and reduced rents and will have greater flexibility in how they use a given space.
Realty Income focuses on clients that provide essential, low-priced services. Its largest tenants by industry are convenience stores, grocery stores, and dollar stores, while its largest customers include 7-Eleven, Dollar General, and Walgreens.
The company is also constantly looking to expand into new sectors and geographies. For instance, earlier this year, Realty Income and Singapore investment firm GIC announced a $1.5 billion joint venture to invest in and make long-term net leases for build-to-suit U.S. logistics properties. Build-to-suit is when a developer builds a facility specifically to meet a tenant's exact specifications.
The joint venture will also provide construction financing for several industrial projects to be built in Mexico and sold to Realty Income upon completion.
The monthly dividend company with a tremendous track record
The longtime draw of Realty Income has been, and will likely continue to be, the company's high dividend and track record of paying and raising it. The company's trailing-12-month dividend yield is 4.8%, and Realty pays dividends monthly.
Realty Income has also managed to pay and increase its annual dividend for more than three decades, putting it among an elite group of companies whose dividends have not been reduced during recessions, pandemics, and other catastrophic events that have shaken the broader stock market. Since listing on the New York Stock Exchange in 1994, Realty Income has increased its dividend at a 4.2% compound annual growth rate.
NYSE: O
Key Data Points
There's no reason Realty can't continue this amazing streak for years, if not decades, to come. As I mentioned earlier, a good way to measure a company's ability to cover and raise its dividend is to look at its earnings power and free cash flow. A key metric for REITs, which essentially measures free cash flow, is adjusted funds from operations (AFFO).
Funds from operations is initially calculated by adjusting net income for depreciation and amortization expenses, gains from the sale of real estate, impairments of real estate, and other adjustments. Then you can get to AFFO by making further adjustments to account for items like capital expenditures and other noncash items.
Through the first nine months of 2025, Realty Income generated $3.19 in AFFO per share while paying cash dividends per common share of roughly $2.41, which is equivalent to about 76% of AFFO. That provides solid coverage of the dividend and ample room to increase it further.
So, based on the stock's 4.8% dividend yield, it would take a purchase of about $20,700 at today's price to generate that $1,000 in passive income.
