Realty Income Corp. (NYSE: O) just reported its fourth-quarter and 2015 year-end results, and the company delivered solid and slightly better-than-expected results. Shares of Realty Income have been a bright spot in the market so far in 2016, up by more than 14% year to date while the S&P 500 is down by more than 10%. Here's what you need to know about Realty Income's latest earnings report, and what we can expect for 2016.

O Chart

Data source: YCharts.

Strong results
Realty Income reported fourth-quarter FFO (the earnings of the REIT world) of $0.71 per share, surpassing analysts' expectations of $0.69. The REIT's revenue of $263.7 million also handily surpassed expectations by $2.7 million.

For the year, FFO per share increased by 7.4% over 2014's results, and AFFO -- adjusted funds from operations, the most accurate way of expressing REIT earnings -- increased by 6.6%. According to CEO John P. Case, this was a result of near-record volume of property acquisitions, favorable terms on capital raised, and strong occupancy.

Speaking of occupancy, one particularly impressive statistic is that Realty Income's occupancy rose slightly to 98.4% despite the most active year ever for lease expirations. While many types of retail are struggling, Realty Income's tenants are not, and the strong lease renewal is proof of this.

Steady, predictable dividend growth
Realty Income pays monthly dividends, and has increased its payouts more frequently and consistently than its peers. Realty Income recently announced its 74th consecutive quarterly dividend increase -- a 5% raise over February 2015's payout. And, the February 2016 dividend payment will represent Realty Income's 547th consecutive monthly dividend payment.

O Dividend Chart

Data source: YCharts.

Most companies increase their dividends once per year, but as I mentioned, Realty Income adjusts its dividend quarterly. As a result, I expect several more increases during 2016 alone. In short, Realty Income has been, and continues to be, a dividend growth machine.

What Realty Income's portfolio looks like now
2015 was Realty Income's third most active year ever in terms of property acquisitions. The company invested $1.26 billion in 286 new properties, which are already 100% leased. Realty Income also sold 38 properties during the year for $65.8 million, pocketing a $22.2 million gain on these sales.

The end result is portfolio growth to 4,538 properties, 98.4% of which were occupied at the end of the year. Realty Income's economic occupancy -- that is, occupancy based on the portfolio's ability to generate rental revenue -- looks even better, at 99.2%.

What to expect in 2016
In its earnings release, Realty Income issued the following earnings guidance for 2016:


2015 Actual

2016 Guidance

Change (YOY)



$2.82 to $2.89

1.8% to 4.3%



$2.85 to $2.90

4% to 5.8%

Data source: SEC Filings. 

While these numbers represent pretty good growth, it's important to mention that Realty Income has a history of under-promising and over-delivering. As I mentioned earlier, at this time last year, Realty Income was projecting AFFO in the range of $2.66 to $2.71 per share, and the actual number was significantly above the high-end estimate. In 2014, FFO and AFFO were both at the high end of the guidance range, and in 2013, the FFO and AFFO of $2.41 beat the high end of both estimates.

With this in mind, I wouldn't be surprised to see another better-than-expected year in 2016, and the market would probably consider anything less a disappointment. This strong history of growth is one of the main reasons Realty Income has averaged a spectacular 17% average total return since its 1994 IPO, and I see no reason to believe this will change anytime soon.