Realty Income (O +0.62%) takes its monthly dividend payments seriously. The real estate investment trust (REIT) also goes by the registered trademarked nickname of "The Monthly Dividend Company." Meanwhile, its stated mission is to "invest in people and places to deliver dependable monthly dividends that increase over time."
The REIT has certainly backed that up over the years. It recently declared its 671st consecutive monthly dividend. That's more than half a century of income consistency. Here's why you'll want to buy the REIT if you desire to generate passive income.
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As bankable as it gets
Realty Income has everything you'd want in a passive income investment. It pays a monthly dividend, making it a breeze to align your passive income with recurring expenses. The REIT currently offers a high dividend yield. At over 5%, it's several times the yield of the S&P 500, which is currently around 1.1%. That higher yield enables investors to generate more passive income per dollar invested in the REIT.
The company backs its high-yielding monthly dividend with a very low-risk business model. Realty Income owns a large, diversified real estate portfolio with over 15,500 retail, industrial, gaming, and other properties across North America and Europe leased to many of the world's leading companies. Long-term net leases underpin its properties. Those leases generate very stable cash flow because tenants cover all property operating costs, including routine maintenance, building insurance, and real estate taxes.
Meanwhile, the REIT has a fortress financial profile. It has a low dividend payout ratio of 71.7% of its adjusted funds from operations. That enables it to retain nearly $1 billion in free cash flow each year to fund new investments. Realty Income also has a fortress balance sheet with A-rated credit.
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A long growth runway
Realty Income has also successfully delivered the second part of its mission by steadily increasing its monthly dividend. It announced its 114th consecutive quarterly dividend increase earlier this year, bringing its total to 134 raises since going public in 1994. The REIT has increased its dividend for 31 straight years, growing it at a 4.2% compound annual rate.
The REIT has plenty more growth ahead. It estimates the total addressable market for net-lease real estate at around $14 trillion across the U.S. and Europe. Realty Income has been steadily expanding its opportunity set by adding new property verticals and geographies. For example, it entered the U.S. data center market in 2023 and made its first investment in Mexico earlier this year. It expects to invest $9.5 billion into new properties this year to support continued dividend increases.
An anchor income holding
Realty Income is the quintessential passive income investment. It pays a high-yielding, steadily growing monthly dividend. The REIT backs that payout with a high-quality portfolio and top-notch balance sheet. These features make it a must-own dividend stock if you want to generate passive income.
