Realty Income(NYSE: O) is on a mission to invest in places that enable it to deliver a dependable monthly dividend to its investors that increases over time. The real estate investment trust (REIT) has succeeded in its mission over three decades as a public company and recently declared its 130th dividend increase since coming public in 1994.
While its latest raise was relatively modest, it has continued to steadily increase its payout through good times and more challenging periods. The REITfirmly expects that upward trend to continue, making it a great stock to buy for a lucrative and rising passive-income stream.
Continuing to extend the streak
Realty Income recently declared its latest monthly dividend payment of $0.2685 per share ($3.222 annualized). That's a modest 0.2% increase from last month's level. However, it had raised its payment by 1.5% just last month and by 4.5% over the past year.
The REIT's latest raise is its 130th since coming public 30 years ago. It has increased its dividend every single year during that period, including the past 110 quarters in a row. It also has grown its dividend at a 4.3% compound annual rate over the past three decades.
"Realty Income's ability to generate consistent, reliable cash flow, even amid periods of market volatility, enables us to continue delivering monthly dividends that increase over time," commented CEO Sumit Roy in the press release declaring its latest dividend payment. The CEO noted that the dividend declaration underscores "the strength of our business model and our commitment to providing shareholders with dependable returns." He also said, "Our proven track record of stable growth is a testament to the resilience of our portfolio and our disciplined approach to investing."
Built on a firm foundation
Realty Income's high-quality global real estate portfolio is the key to delivering reliable and growing monthly dividends. It owns a diversified portfolio of properties net leased to the world's leading companies. The REIT focuses on owning properties secured by net leases because they provide stable income because the tenant covers all operating costs including routine maintenance, real estate taxes, and building insurance.
Realty Income also strives to be a real estate partner to the world's leading companies. That approach routinely gives it more opportunities to invest in high-quality real estate as its partners grow. Roy commented on this strategy during the REIT's fourth-quarter conference call.
He stated: "Throughout 2024, we further solidified our position as a trusted real estate partner to the world's leading companies. We strengthened our partnerships through repeat business with long-standing clients and top global names, including 7-Eleven, Morrisons, and Carrefour."
He highlighted that the company closed a $770 million sale-leaseback transaction with 7-Eleven in the fourth quarter. The convenience-store operator is now its top client at 3.5% of its annualized rent. The REIT built that leading relationship over the past decade by closing six sale-leaseback transactions with 7-Eleven.
Realty Income also has a rock-solid financial foundation. The REIT has a conservative dividend payout ratio (less than 75% of its adjusted funds from operations (FFO) last year). That gives it a sizable cushion while allowing it to retain meaningful excess free cash flow to reinvest into new income-generating real estate (nearly $920 million last year).
It also has an elite balance sheet. It's one of only eight REITs with two bond ratings of A3/A- or better. That gives it tremendous access to low-cost debt financing at attractive terms.
The REIT's financial flexibility enables it to invest billions of dollars into high-quality real estate each year. Those new investments grow its adjusted FFO per share, enabling the REIT to continue increasing its dividend.
A top-notch income stock
Realty Income has done a magnificent job increasing its dividend over the years. The REIT routinely gives its investors a raise, which seems likely to continue in the future. That makes it an excellent dividend stock to buy and hold for a durable and steadily rising income stream.
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