Source: Flickr / Peter Kaminski.

Earnings season is upon us, and there is one thing investors must keep an eye on when Realty Income (NYSE:O) announces its earnings this week.

Impressive results
Realty Income reported record results in the first quarter, as it grew its per share adjusted funds from operations by 6.7% to stand at 0.64% per share. 

Yet one of the most eye-opening things Realty Income announced was that during the first three months of 2014 it purchased $657 million worth of new properties, the second largest amount the company had acquired in its illustrious history.

But the company said it had a somewhat staggering $1.3 billion still available to fund acquisitions. And that's why the big thing I'll be watching is exactly what it does with that money and the details of the properties it acquires.

Source: Flickr / Images of Money.

Diving in to the details
Taking a step back, undeniably, hitting record earnings was a notable feet for Realty Income. But one the most eye-grabbing things were the details surrounding the properties it acquired. In fact, its CEO, John Case, admitted simply in the earnings release that "acquisitions again contributed to these positive first-quarter results."

To begin, all 337 properties were leased, with an average lease term of 14.2 years. And while the 98.3% occupancy rate and average lease term of 10.8 years for all 4,200 properties Realty Income owns is impressive, the fact its new properties topped those was notable.

But it wasn't just the first quarter that was impressive, because it just represented a continuation of its efforts in 2013. Last year it purchased 459 new properties for $1.5 billion, 100% of which were leased, and the average term was 14 years.

While the first quarter did see the lease yield -- the difference between what it pays for the property relative to what it receives in rent -- fall slightly, as it moved from 7.1% in 2013 to 7%, a difference of 0.1% isn't cause for any sort of concern.

Yet the truly eye-opening thing in the first quarter was that of the more than $650 million in properties it acquired, 84% of the revenue came from investment-grade tenants. These are the companies the rating agencies consider to be the safest.

By comparison, just 65% of the revenue delivered from the properties it purchased in 2013 were from investment-grade tenants. And overall, just 44% of its total rent received in the first quarter was from those deemed as investment-grade. In fact, before 2010, just 5% of the properties the company acquired had tenants deemed to be investment grade by the rating agencies.  

Why this matters
With all that in mind, the reality is, Realty Income isn't just growing in size -- it's also growing in safety.

Over the past four years, this is undeniably a welcome trend, and when the second-quarter results are announced, the first thing I'll be checking is to see whether this remarkable has continued.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.