We own 1,160 shares of O as a long-term investment. At the current price (close as of 05/25/21) these shares are worth about $80,000. This is not a growth investment. Rather, O pays a monthly dividend with a good AFFO (Adjusted Funds from Operations) ratio. Realty Income is also merging with VER (VEREIT, Inc.).
VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The Company has total real estate investments of $14.6 billion including approximately 3,800 properties and 88.9 million square feet. The all-stock VEREIT merger enables the company to gain strong diversification while creating an office spin-off.
Our Current Ownership of O
Realty Income Corporation is another long-term income investment. Over the years I have added shares when the price drops. We hold shares in Cindie’s IRA and ROTH, and in my IRA, ROTH, and brokerage accounts.
Why Does O Qualify for the TOP TEN?
Realty Income is the second REIT in the top ten. Number ten (ABR) was discussed in an earlier post. For a REIT, the P/E ratio is of less interest than the P/FFO ratio. This is the price of the stock divided by “Funds From Operations.” Always look at that number when considering a REIT investment.
O’s the dividend yield is a satisfactory 4.10% and it is made even more attractive because the dividend is paid monthly. That means we receive about $273 every month, or a bit more than $3,270 per year. To put this in perspective, in 2020 our total costs for electricity and gas were $2,285. If we add in our internet service and US Cellular phone costs, the total “utilities” is $3,570 per year. In other words, O pays the bills.
If you are a growth investor, you probably don’t want O in your retirement portfolio. However, keep one other thing in mind. If you receive monthly dividends from O, and you aren’t retired, you can invest those dividends in growth stocks or growth ETF’s. Also remember that you won’t get 4.1% from your bank for your cash in a low interest rate environment. O is certainly more risky than and FDIC-insured account, unless you start thinking about inflation.
The Real Estate and “Retail REITs” Playing Field
According to Seeking Alpha, there are 195 Real Estate sector investments you can choose from. Of those, 30 are “Retail REITs” companies. O is currently ranked as 100 in the Real Estate sector. In the industry section they are number 22 of 30. This would cause most investors to shy away from O because there must be better choices. However, in terms of Market Cap and dividend yield, O is a good fit for our retirement income investment mix. I’ve looked at the top REITs, and I have a hard time replacing O as my number six investment.
ETN’s Sector, Industry, and Market Cap
Sector: Real Estate
Industry: Retail REITs
Market Cap: $24.90B
Headquarters: San Diego, CA, founded in 1969
Company Profile https://www.realtyincome.com/Home/default.aspx
Realty Income, The Monthly Dividend Company, is an S&P 500 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 our commercial clients. To date, the company has declared 608 consecutive common stock monthly dividends throughout its 52-year operating history and increased the dividend 109 times since Realty Income’s public listing in 1994 (NYSE: O). The company is a member of the S&P 500 Dividend Aristocrats index. Additional information about the company can be obtained from the corporate website at http://www.realtyincome.com.
Know Your Flocks & Herds 