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Realty Income O, a leading net lease REIT, reported its fourth-quarter and full-year 2024 results early this week. While the company showcased resilience with steady occupancy rates and a strong investment pipeline, its adjusted funds from operations (AFFO) per share miss and macroeconomic headwinds have raised concerns among investors.
O’s fourth-quarter 2024 AFFO per share of $1.05 missed the Zacks Consensus Estimate of $1.06, with total revenues of $1.34 billion for the quarter falling short of the consensus mark of $1.35 billion. However, both AFFO per share and revenues were up year over year. What was disappointing was that the company's 2025 guidance was lower than the consensus estimate. Management projected its 2025 AFFO per share to be in the band of $4.22-$4.28, below the Zacks Consensus Estimate pegged at $4.32. As a result, Realty Income stock has fallen 1.3% since Monday’s close.
Nevertheless, Realty Income maintained an impressive 98.7% occupancy rate as of Dec. 31, 2024, in line with the previous quarter and up 10 basis points year over year. In the reported quarter, the company achieved a rent recapture rate of 107.4% on re-leasing properties. Moreover, O’s investment activity continued at a solid pace, with the company investing $1.7 billion at an initial weighted average cash yield of 7.1% in the fourth quarter.
Realty Income Corporation Price, Consensus and EPS Surprise
Realty Income Corporation price-consensus-eps-surprise-chart | Realty Income Corporation Quote
Amid market uncertainties emanating from policy shifts, economic volatility and anticipations of high inflation and elevated interest rates for a prolonged period fueling investor skepticism toward Realty Income stock, let us break down the key fundamentals and recent developments to evaluate whether the stock remains an attractive investment.
What Aids Realty Income Stock's Growth?
Realty Income maintains a highly resilient portfolio, making it an attractive option for fixed-income investors. Its strong growth and diversification have transformed it from a traditional net lease operator into a top-tier REIT with a broad, multi-sector and geographically diverse asset base. Realty Income’s solid underlying real estate quality and prudent underwriting at acquisition have helped the company maintain high occupancy levels consistently. Despite economic uncertainties, Realty Income maintained an impressive 98.7% occupancy rate as of Dec. 31, 2024. Management expects the 2025 occupancy to remain above 98%.
Realty Income’s growth strategy appears promising, fueled by its increasing global footprint, especially in Europe, which paves the way for sustained expansion. Its diversification into emerging asset classes, such as gaming and data centers, highlights a progressive, future-oriented approach. For 2024, the company allocated $3.9 billion in investments, achieving an initial weighted average cash yield of 7.4%. This included $2.0 billion deployed in the United States at a 6.9% yield, while the remaining $1.9 billion was invested in Europe at an initial yield of 8%. O now expects a full-year investment volume of approximately $4 billion.
The company closed a $770 million sale-leaseback transaction with 7-Eleven, making the retailer its top client, accounting for 3.5% of annualized rent. This marks the sixth such deal with 7-Eleven, demonstrating Realty Income’s strong client relationships.
With strong cash flows from 15,621 properties in all 50 U.S. states, the U.K. and six other countries in Europe, as of Dec. 31, 2024, Realty Income boasts a solid balance sheet and A3/A- credit ratings from Moody’s and S&P. O ended 2024 with $3.7 billion in liquidity and a fixed charge coverage ratio of 4.7. Net debt to annualized pro-forma adjusted EBITDAre was 5.4X. The company is also exploring a private capital initiative to build upon its established platform to unlock new investment opportunities.
Boasting a 5.65% dividend yield and a strong track record of consistent payouts, Realty Income, known as “The Monthly Dividend Company,” continues to be a reliable choice for income-focused investors. Its commitment to dividends remains strong, having increased them for 30 consecutive years. The latest hike was announced recently and involves a sequential increase of 1.5% in its monthly dividend to 26.80 cents, to be paid in March 2025. It has achieved 4.3% average annual growth since 1994.