Warren Buffett once said his favorite holding period for the right stock was "forever." However, it can be tough to find the right stock to simply buy, hold, and forget, as geopolitical conflicts, tariffs, trade wars, and other macro headwinds rattle the markets.
If you're worried about those unpredictable challenges, you should buy an evergreen dividend stock with a proven track record of rewarding its long-term investors. One of those stocks is Realty Income (O -0.68%) -- and I'll give you 10 simple reasons to buy and hold it forever.
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1. It pays out most of its profits as dividends
Realty Income is one of the world's largest real estate investment trusts (REITs). REITs buy a lot of properties, rent them out, and split the rental income with their investors. REITs must pay out at least 90% of their taxable income as dividends to maintain a favorable tax rate, so they'll generate steady income as long as their properties are occupied.
2. It's a triple net lease REIT
REITs provide single, double, and triple net leases. In a single net lease, the tenant pays the property taxes while the REIT pays the insurance and maintenance costs. In a double net lease, the tenant pays the property taxes and insurance, while the REIT pays the maintenance costs.
But in a triple net lease, the tenant pays all the taxes, insurance premiums, and maintenance costs, while the REIT pays practically nothing. Realty Income, along with most major REITs, use triple net leases to reduce their expenses and maximize their profits.
3. It's well diversified
Realty Income owns more than 15,600 properties in all 50 U.S. states, the U.K., and six countries in Europe. Its clients are diversified across 91 different industries, but it focuses heavily on recession-resistant businesses like convenience stores and discount retailers.
Realty's top tenants include 7-Eleven, Dollar General, Walgreens, and Dollar Tree, but none of those tenants account for more than 3.4% of its annualized rent. Some of those tenants have struggled with store closures in recent years, but many of its stronger tenants are picking up the slack.
4. Its occupancy rates are high
Realty Income currently has an occupancy rate of 98.5% across its properties, and that metric has never dropped below 96% since its IPO in 1994. Its ability to maintain those high occupancy rates through the Great Recession, the COVID-19 pandemic, and the borderline recession of 2022 indicate it's built to withstand tough economic downturns.
5. Its leases are long
As of its latest quarter, Realty had a weighted average remaining lease term (WALT) of 9.1 years. Those long-term leases should help to further insulate it from the near-term challenges.
6. It pays monthly dividends
Realty Income pays its dividends monthly, which sets it apart from many other companies, which only pay quarterly dividends. That makes it a solid choice for retirees, who likely favor predictable cash payments every month, as well as long-term investors, who can continue reinvesting those dividends to compound their total returns.
7. It consistently raises its dividends
Realty Income has raised its dividend 130 times since its public debut. It's also raised that payout for 110 consecutive quarters. That represents a total 258% increase and a compound annual dividend growth rate of 4.2% for its dividend since 1994.
8. It pays a higher yield than the 10-Year Treasury
Realty currently pays a forward dividend yield of 5.65%, compared to the 10-year Treasury's current yield of 4.38%. If interest rates continue to decline, more income-oriented investors will likely pivot from T-bills toward Realty Income and other reliable REITs.
9. Lower interest rates will boost its profits
REITs often struggle when interest rates rise, since it becomes more expensive to take out loans to buy additional properties. Elevated interest rates can also disrupt the growth of its tenants, which can lead to business closures and higher vacancy rates. So as interest rates continue to decline, Realty Income's profits should rise.
10. It still looks undervalued
Realty Income and its REIT peers usually gauge their profitability with their adjusted funds from operations (AFFO). Realty's AFFO per share rose at a steady CAGR of 5% from 2014 to 2024, and it expects that figure to rise 1%-2% to $4.22-$4.28 per share in 2025. That will easily cover its forward annual dividend rate of $3.23 per share.
At $57, Realty Income trades at just 13 times this year's AFFO. Back when it closed at its all-time high of $64.19 on Aug. 15, 2022, it was trading at 16 times its AFFO for 2022. That low valuation should limit its downside potential in this wobbly market -- so I think it's a great time to load up on some shares and hold them forever.
