introduction
REIT's are commonly seen as a good hedge against inflation and typically pay large, reliable dividends. Realty income (NYSE:O) is a dividend aristocrat. It has increased its dividend payments at a compound average annual growth rate of approximately 4.4% every year since it went public in 1994. On paper it may look overvalued, however investors have always afforded this stock a price premium since it has a long history of growth and part of the business model involves share dilution to fund asset purchases and fuel growth.
Another aspect of the business model is how properties are acquired and the relationship realty income has with its tenants. They operate a net lease model which means most operating costs are handled by the tenants and the properties will be single occupancy. Typically a business will sell their land to realty income for a cash injection, effectively making themselves tenants in their former properties. Corporate tenancies are usually in the realm of 10 years, making the income from these customers highly resilient to economic turndowns.
The other great thing about realty income is that they pay a monthly dividend!
Some financials
NOTE: metrics are at time of writing and aren't updated
| metric | amount |
|---|---|
| Gross profit margin | 93.56% |
| Return on investment (1994 compounded) | 15.1% |
| PE | 68.07 |
| PEG | 14.45 |
| PS | 13.75 |
| PB | 1.7 |
| Revenue growth | 26% |
| Market Cap | $43.32B |
| Share price | $72.47 |
| Beta | 0.71 |
| Short interest | 3.39% |
Caveats
RETS are super low risk, reliably return compounding profits and have strong moats. A property crisis such as '08 would just mean cheaper properties to gobble up so no risk there. The only risk to this stock would be a serious failure of management,and I'm talking beyond incompetent.
Sources
Freetrade
Ycharts
Realty income factsheet (PDF)
Yahoo finance
MarketWatch
Realty income homepage
Motley Fool
