Aspiring investors seeking long-term growth and stable income often turn to stocks known for their reliable dividends. One stock that stands out in this regard is Realty Income Corporation (NYSE: O). Realty Income, a real estate investment trust (REIT), is referred to as “The Monthly Dividend Company” due to its monthly dividend payments. In this article, we’ll examine why investing in O stock could be a smart move for your financial future.
The basics: What is Realty Income?
Realty Income is a REIT that invests in commercial properties across the United States and U.K. The company’s portfolio includes over 6,500 properties leased to over 600 tenants from 52 different industries, including convenience stores, drug stores, and supermarkets. Realty Income generates revenue by leasing these properties to tenants on a long-term basis.
Why invest in O stock?
Realty Income has a long history of providing a reliable stream of income to investors. It has paid 602 consecutive monthly dividends and has increased its dividend for 25 consecutive years, making it a dividend aristocrat. This track record of consistent dividends and dividend growth makes it an attractive investment for those seeking income.
In addition to its stable dividends, Realty Income has also delivered strong total returns to investors. Over the last decade, Realty Income’s total annualized return was 16.1%, compared to the SP 500’s annualized return of 13.6%. Additionally, Realty Income’s share price has consistently appreciated over time, growing at an average annual rate of 15.4% from 1994 to 2019.
Understanding Realty Income’s business model
Realty Income’s business model is straightforward. The company invests in commercial properties and leases them to tenants on a long-term basis. This provides the company with a reliable stream of rental income, which it then uses to pay dividends to investors. Realty Income’s long-term leases typically have annual rent increases, allowing the company to generate long-term sustainable growth in rental income.
Realty Income’s focus on high-quality properties and tenants has enabled it to maintain high occupancy rates over the years. As of December 2020, the company’s occupancy rate was 98.3%. This high occupancy rate, coupled with long-term leases, provides investors with stable income that is not subject to short-term market fluctuations.
How Realty Income mitigates risk
One of the biggest risks facing real estate investors is the potential for the value of their properties to decline. However, Realty Income mitigates this risk by investing in high-quality, non-discretionary properties, such as drug stores, supermarkets, and convenience stores. These types of properties are essential to their tenants’ business operations and are less likely to be affected by economic downturns.
Realty Income also mitigates risk by having a well-diversified portfolio of properties and tenants. This reduces the impact of any single tenant or property on the company’s overall performance. In addition, the company’s long-term leases provide stability and predictability, reducing the risk of short-term market fluctuations.
How to invest in O stock
Investing in O stock is easy and can be done through any online brokerage account. Investors can purchase shares of O stock just like they would any other stock. It is important to note, however, that because Realty Income is a REIT, its dividends are taxed differently than regular stock dividends. REIT dividends are typically taxed at a higher rate, so investors should consult with a tax professional before investing.
FAQs:
1. What are the benefits of investing in Realty Income?
Realty Income provides a reliable stream of income through monthly dividends that have been consistent and growing for over 25 years. Additionally, the company has delivered strong total returns to investors over the years.
2. What are the risks of investing in Realty Income?
As with any investment, there is always a risk of the value of your investment declining. However, Realty Income mitigates this risk by investing in high-quality, non-discretionary properties and by having a well-diversified portfolio of tenants and properties.
3. How are Realty Income’s dividends taxed?
Realty Income is a REIT, so its dividends are taxed differently than regular stock dividends. REIT dividends are typically taxed at a higher rate, so investors should consult with a tax professional before investing.
4. How can I invest in O stock?
Investors can purchase shares of O stock through any online brokerage account.
5. What is Realty Income’s occupancy rate?
As of December 2020, Realty Income’s occupancy rate was 98.3%.
6. Does Realty Income focus on specific types of properties?
Realty Income focuses on investing in high-quality, non-discretionary properties, such as drug stores, supermarkets, and convenience stores.
7. How long has Realty Income been paying monthly dividends?
Realty Income has paid 602 consecutive monthly dividends.
8. How long has Realty Income been increasing its dividends?
Realty Income has increased its dividend for 25 consecutive years, making it a dividend aristocrat.
9. What is Realty Income’s average annual growth rate?
Realty Income’s share price has grown at an average annual rate of 15.4% from 1994 to 2019.
10. Is investing in O stock a good choice for income investors?
Yes. Realty Income’s consistent dividends and long-term track record of dividend growth make it an attractive investment for income investors seeking stable, long-term income.
Conclusion
Investing in O stock can be a smart choice for long-term growth and income. Realty Income’s reliable monthly dividends, long-term track record of dividend growth, and strong total returns make it an attractive investment for investors seeking stability and long-term growth. By investing in high-quality, non-discretionary properties and maintaining a well-diversified portfolio, Realty Income mitigates risk and provides investors with a stable stream of income that is not subject to short-term market fluctuations.
