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Instant Analysis: Realty Income Raises Its Dividend

By Eric Volkman – Dec 22, 2015 at 7:12AM

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The REIT adds incrementally to its payout.

What happened?
One of the most durable and popular real estate investment trusts on the market, Realty Income (O -0.22%), increased its monthly dividend. The company added half a cent to its payout, which now stands at just over $0.19 per share. The REIT bills itself as "the monthly dividend company," and true to its name, it pays a distribution every 30 days or so. The raise is its 83rd since it went public in 1994; across that span of time, it has made nearly 550 dividend payments. Collectively, these amount to $3.8 billion. The new payout will be dispensed on Jan. 15 to shareholders of record as of Jan. 4.

Does it matter?
Realty Income raises its dividend often enough that this latest move shouldn't come as a surprise. We can't quite say that those increases are predictable, as they often occur at irregular intervals. Regardless, they're a sign that the veteran REIT continues to hum merrily along as it has for decades. After all, it's one of the most solid performers in the industry.

It's dividend is substantial, too. At the current share price, the new payout yields 4.5%. That's more or less on par for the retail REIT segment. Competitor National Retail Properties (NNN 0.56%), for one, also pays out at that level.

Particularly in recent years, Realty Income has been adept at growing its funds from operations, a key profitability metric for REITs. In its most recent quarter, the company's adjusted FFO leaped by an impressive 16% to $166 million. What helps greatly is that the buildings in Realty Income's portfolio are stuffed nearly to capacity, with occupancy over 98%. That's particularly impressive given that the company holds nearly 4,500 properties throughout the U.S. and Puerto Rico.

It operates in a good segment; a thriving economy creates strong demand for the retail space. There's plenty of business to go around. Like Realty Income, National Retail Properties boasts sky-high occupancy (99% in its most recently reported quarter).

So Realty Income, National Retail Properties, and their peers should continue to do well. The former's newly raised dividend, modest as it is, is a sign that the times are good, and profits continue to flow.

Eric Volkman has no position in any stocks mentioned, and neither does The Motley Fool. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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