Ticker Symbols
Why do ticker symbols exist? It wasn’t because they were needed for computer trading. The New York Stock Exchange (NYSE) was founded on March 8, 1817. Everything was paper transactions back then. When the company name had to be written down on transaction slips, it was faster to write the company being traded with a letter or group of letters. Some of the largest companies listed on the NYSE have single letter ticker symbols. Not all of the one-letter symbols are obvious, nor does a one-letter symbol mean the company is a good investment. While it used to be that only NYSE had one-letter tickers, now Zillow (Z) is listed on the NASDAQ. I know some of the company ticker symbols by memory. They include T: AT&T, F: Ford Motor Co., Visa Inc.: V and US Steel: X.
The companies with single letter symbols cover a broad spectrum of business sectors. Some companies came into existence recently, and others have been in business for many years. One company was formed in the year I graduated from high school: 1969. The ticker symbol for that company is O.
Before I forget, each of the green letters is a single-letter ticker symbol for a publicly listed company. But I want to talk about just one of them today.
Realty Income Corporation (Ticker = O)
This company is a dividend aristocrat. They are “The Monthly Dividend Company®”, as a company dedicated to providing stockholders with dependable monthly income. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants. To date, the company has declared 604 consecutive common stock monthly dividends throughout its 51-year operating history and increased the dividend 108 times since Realty Income’s public listing in 1994 (NYSE: O). The company is a member of the S&P 500 Dividend Aristocrats index.
Evaluating REIT Investments is different
A wise investor should review some important attributes of a REIT. These can be confusing. I’ve talked about this before, but terms you should understand are FFO, AFFO, occupancy rates and leverage. FFO and AFFO are the measurements used to determine if the REIT can continue to pay the dividend. A typical payout ratio for a REIT might look crazy. For example, if you use the Fidelity Investments web site you will see that O’s dividend payout ratio is 234.00%. Investing in a company with a payout ratio greater than 90-100% is generally a recipe for disaster. Unfortunately, Fidelity does not account for REITs and the real payout ratio based on FFO. On Seeking Alpha the payout ratio is shown as 84.41%. That is a more accurate measurement.
Covid-19 Stresses
Some REITs are struggling. If they were focused on entertainment properties, income can be a problem, so full occupancy is great until the property becomes anathema. Thankfully, O has tenants, for the most part, that can and do make their rental payments.
Occupancy
If a REIT owns warehouses, offices, retail malls, apartment buildings or other similar assets, you should expect the occupancy to be high. Low occupancy means fewer tenants which translates into long-term trouble. O is a quality holding in this regard. You might recognize one tenant: Walgreens.
Geography
Where are the properties. You probably have heard the three most important data points for picking real estate is “location, location, and location.” For a REIT, an investor should consider the locations. For example, if a REIT is solely focused on Florida, you might want to consider hurricanes in your analysis.
Dividend Income and Growth
Some REITs do not have magnificent dividend growth. Realty Income is one of those. But what O lacks in growth, it makes up for in yield (4.62%) and a long history of paying the dividend. They also pay monthly. Cindie and I receive a total of $242.00 per month in O dividends. That more than pays for our gas and electricity services. The shares won’t likely quickly grow in value. That is OK. We can collect the rent and just wait for share appreciation down the road.
Full Disclosure – we own shares of O
Cindie and I own 1,035 shares of O as a long-term investment. It is in the top ten investments we hold. The other top ten companies include: ABBV, ARCC, MAIN, MPW, PFE, T, VLO, and one ETF: VYM. This is not a recommendation for you to buy any of these, but they give insights into what I like.
Know Your Flocks & Herds 