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Amid macroeconomic uncertainties and market volatility, focusing on dividend stocks is gaining traction, and this brings our attention to Realty Income O. "The Monthly Dividend Company", which is an S&P 500 Dividend Aristocrats index member, has recently announced its 130th dividend hike since its listing on the NYSE in 1994.
The stock fell more than 14% from its 52-week high achieved last October, closing at $55.65 on Tuesday. However, the sell-off has led Realty Income to offer higher dividend yields, presenting an opportunity for investors. Its dividend now yields 5.8%. So far in the year, the stock has outperformed the Zacks REIT and Equity Trust - Retail industry and the S&P 500 composite.
Nevertheless, before hastily deciding to remove this stock from your portfolio or rushing to buy, it’s important to evaluate whether this REIT has strong growth potential to sustain its dividend payments and assess whether the current concerns could significantly impact the company’s performance.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Is Realty Income's Growth and Dividend Built to Last?
Realty Income has a solid track record of consistently paying dividends. “The Monthly Dividend Company” has delivered 24 dividend increases over the past five years. It has delivered 30 consecutive years of rising dividends and 110 consecutive quarterly increases. O has witnessed compound average annual dividend growth of 4.3% since 1994. This track record underscores its resilience and solidifies its appeal as a reliable, income-focused investment for shareholders. Check Realty Income’s dividend history here.
What is encouraging is that this payout rests on a solid and reliable footing with robust cash flows generated from 15,621 properties spanning all 50 U.S. states, the U.K. and six other European countries as of Dec. 31, 2024, along with a strong balance sheet and A3 /A- credit ratings by Moody’s & 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. Moreover, Realty Income has a well-laddered debt-maturity schedule with a weighted average maturity of 6.6 years.
This REIT is well-positioned to sustain its dividend growth moving forward. Realty Income has experienced significant growth and diversification, evolving from a traditional net lease operator into a leading REIT with a broad portfolio across various industries and regions. Over the past decade, the company has strategically expanded beyond its retail foundation, entering the industrial sector to leverage the rise of e-commerce and omnichannel retail. This strategic shift has enhanced its market standing while reducing exposure to traditional retail risks.
Realty Income’s move into non-traditional asset classes, including gaming and data centers, highlights its strategic focus on future growth. Notable investments like Encore Boston Harbor and Bellagio Las Vegas, coupled with a partnership with Digital Realty DLR for data center investments, reflect its strategic pursuit of high-growth opportunities.
Realty Income’s growth strategy appears promising, fueled by its increasing global footprint, especially in Europe, which paves the way for sustained expansion. For 2024, the company allocated $3.9 billion in investments, achieving an initial weighted average cash yield of 7.4%. O now expects a full-year 2025 investment volume of approximately $4 billion. Moreover, with the company estimating the total addressable market for net lease real estate investments in the United States of $5.4 trillion and another $8.5 trillion in Europe, Realty Income has a solid investment opportunity.