The beauty of investing is that you don't always need stock prices to rise to make money. Of course, it's great when they do, but dividends are a way for companies to reward investors for simply holding their stock. You can't predict how stock prices will move, but you can count on your dividends if you're investing in high-quality stocks.
Most dividend stocks pay quarterly dividends, but some do it monthly. This could be beneficial for people who need extra monthly income for bills, want to reinvest dividends more often, or prefer a more frequent cash flow.
If you're looking for monthly dividend income, look no further than Realty Income (O +0.64%).
So, what exactly is Realty Income?
Realty Income is a real estate investment trust (REIT) that specializes in single-unit freestanding commercial properties, including grocery stores, convenience stores, dollar stores, drugstores, and more. Its top three clients are 7-Eleven, Dollar General, and Walgreens.
Realty Income buys properties, charges rent to tenants (which also cover expenses like property taxes and maintenance), and pays its shareholders from the rental income. In the first quarter, it earned close to $250 million in net income that was available to its shareholders.
O Net Income (Quarterly) data by YCharts.
NYSE: O
Key Data Points
Realty Income is one of the more established REITs, having been listed on the New York Stock Exchange since 1994. It's now the seventh-largest REIT in the world, with around $59 billion in real estate as of March 31.
Since 1992, its properties have consistently maintained an occupancy rate above 96%, ensuring that investors receive steady and reliable income. Higher occupancy means more rent, which means higher payouts for investors.
Consistent income you can count on
A stock that pays an attractive dividend is a good thing, but it only truly matters if it can sustain it. With Realty Income, you don't have to worry about that. The company has declared a monthly dividend for 659 consecutive months, including increasing the payout for the past 110 quarters.
The monthly dividend is $0.2685 with a yield of around 5.6% as of June 9, which is a bit higher than its average for the past decade.
O Dividend Yield data by YCharts.
Yields fluctuate in the opposite direction to stock prices, so they will inevitably change. However, if we assume it remains at 5.6% for the sake of illustration, every $10,000 invested could pay $560 annually, or around $46 monthly.
The above payout isn't enough to begin Lamborghini shopping, but Realty Income can be a solid income source after consistently buying shares through the years.
It's also worth noting that dividend payouts from REITs are taxed like regular income and don't receive the preferential rate that qualified dividends from traditional stocks or ETFs receive.
A history of outperforming the market
Since Realty Income hit the market in 1994, its stock price has outperformed the S&P 500 by around 1,250% to 1,180%. However, when you take dividends into account, its gains have far exceeded the S&P 500's returns by roughly 8,490% to 2,170%.
For perspective, here's how much a $10,000 investment in each during that time would be worth now, assuming you reinvested dividends:
Past results don't guarantee future performance, so I wouldn't invest in Realty Income expecting the same over the next 30 years. But maintaining an annual average growth rate above 12% since 1994 is impressive and shows just how lucrative an investment it can be.
