Consider Equity REITs For Your Next Investment: Realty Income, Inc.

I recently wrote an article for Sure Dividend entitled “Consider Equity REITs for Your Next Investment“.In that article, I listed nine equity REITs for dividend investors to consider in light of the drubbing that REIT valuations have recently taken due to fear of rising interest rates and to capitalize on the pass-through provision for REIT income included in the new tax legislation.Both of these topics are covered in some detail in the previous article. This article provides a more complete investment thesis for Realty Income (O), one of the nine REITs highlighted in the previous article.

Realty Income, Inc. 

Realty Income is a triple net lease REIT with holdings in the retail, office, industrial, and farmland space plus some relatively small holdings in mortgage loans.Realty Income was founded in 1969 and went public on the NYSE in 1994 and has an enterprise value of roughly $22B today.

For those readers not familiar with triple net leases, also known as NNN (not to be confused with the ticker symbol NNN), it is a contractual relationship where the tenant is responsible for property taxes, insurance, and maintenance costs.In fact, Realty Income has a number of different attributes compared to other more typical retail space REITs as the chart below shows.

Source:  Realty Income Investor Website

The differences are significant and provide Realty Income significant business advantages over typical retail space REITs.These advantages have resulted in a significant performance advantage over most other retail space REITs.The chart below shows Realty Income’s performance and volatility compared to major market indexes.

Source:  Realty Income Investor Website

Not many stocks can offer index beating total returns with lower overall market volatility and it is worth noting that performance has been over a period of more than 20 years.

The REIT is pretty well known in the investment community and has adopted the unofficial moniker of “The Monthly Dividend Company” because it pays out its dividend distribution on a monthly basis.I’ll cover it in a bit more detail further into the article but it is worth noting that Realty Income has raised its dividend for 81 consecutive quarters.That is more than 20 years of increasing the dividend every three months.Realty Income has raised its dividend at least every year for more than 25 years.The chart below shows Realty Income’s annual dividend growth since being listed on the NYSE in 1994.