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Globe and Mail
16 hours ago
- Business
- Globe and Mail
Do You Want to Maximize Your Returns? Buy This Low-Risk, High-Yield Dividend Stock.
Many investors tend to fall into one of two camps. They're either trying to maximize their income or their growth. A singularly focused strategy like that can sometimes miss the mark if your stocks stop generating income or growing. A better strategy is to focus on maximizing your total return by investing in companies that pay a growing dividend. That combination of income and growth can really add up over the years. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Realty Income (NYSE: O) has done an excellent job of maximizing investors' returns over the years. The real estate investment trust (REIT) currently offers a high-yielding income stream and solid growth prospects at a value price. Because of that, it's in a strong position to help investors maximize their returns in the future. A bankable income stream The hallmark of Realty Income is its monthly dividend. The REIT calls itself The Monthly Dividend Company. It has declared 660 consecutive monthly dividends since its formation and increased its dividend payment 131 times since its public market listing in 1994. The REIT has unbroken streaks of 111 straight quarters and 30 consecutive years of dividend increases and has grown its payout at a 4.2% compound annual rate during this period. Realty Income's dividend currently yields 5.6%, and that high-yielding payout is on a rock-solid foundation. The REIT generates very stable income. It owns a diversified portfolio of high-quality real estate (retail, industrial, gaming, and other properties), net leased to many of the world's leading companies. Net leases produce very stable rental income because tenants cover all property operating costs, including routine maintenance, real estate taxes, and building insurance. The REIT pays out a conservative percentage of its stable cash flow in dividends (75% of its adjusted funds from operations, or FFO). That allows it to retain excess free cash flow to fund new income-generating real estate investments. Realty Income also has one of the 10 best balance sheets in the REIT sector. Remarkably resilient growth Realty Income has been able to steadily increase its dividend because it has delivered remarkably consistent growth. Since its public market listing, the company has delivered positive adjusted FFO per share growth every year, except one (2009, during the financial crisis). It has grown during periods of higher interest rates (5% compound annual FFO growth from 1996 to 2008) and low interest rates (5.4% compound annual growth from 2009 to 2022). It has also grown through multiple periods of economic stress (the Dot-com bust, the housing market crash, the pandemic, and the regional banking crisis). Two factors have contributed to its durable growth: the REIT's high-quality net lease real estate portfolio and fortress-like financial profile. Its portfolio produces stable income to pay dividends, while its financial profile allows it to expand its portfolio in any market environment. This combination of durable income and growth has added up over the long term. The REIT has paid an average dividend yield of 6% since its initial public offering in 1994. Meanwhile, it has historically delivered 5% average annual adjusted FFO per share growth. These factors have combined to provide investors with an average annual total operational return (dividend income plus adjusted FFO growth rate) of around 11%. On top of that, it has delivered valuation multipleexpansion since its IPO, which has pushed its compound annual total return to 13.6% since its public market listing. Compelling return potential from here Realty Income continues to offer investors a very bankable, high-yielding dividend, which will provide them with a low-risk base return. Additionally, the company has tremendous long-term growth potential. The total addressable market for net lease real estate in the U.S. and Europe is $14 billion. That provides the REIT with a very long runway to continue growing its adjusted FFO per share at a mid-single-digit annual rate over the long term. In addition to all that, Realty Income trades at a compelling valuation compared to other REITs. It currently sells for about 13 times its adjusted FFO, which is well below the 18x average of other REITs in the S&P 500. Realty Income trades at a discount to its REIT peers, despite consistently delivering a higher operational return compared to its peers (9.7% average over the past five years, compared to 7.7%). When taken together, Realty Income's dividend yield, growth potential, and low valuation put the REIT in an excellent position to deliver attractive total returns in the future. Because of that, it's a great all-around stock to buy if you want to maximize your return potential. Should you invest $1,000 in Realty Income right now? Before you buy stock in Realty Income, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,702!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $870,207!* Now, it's worth noting Stock Advisor 's total average return is988% — a market-crushing outperformance compared to172%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025
Globe and Mail
08-04-2025
- Business
- Globe and Mail
1 Dividend Stock Yielding More Than 6% to Buy Now
In a market full of noise and volatility, Realty Income (O), a dependable dividend-paying real estate investment trust (REIT), offers stability and consistency. It has established a reputation for dependable, consistent returns and a business model geared toward long-term stability. The stock is down slightly in the year to date and is outperforming the S&P 500 Index ($SPX). Let's find out why Realty Income deserves to be on your radar. Realty Income: The Monthly Dividend Company Realty Income's entire business model is based on owning and leasing commercial properties, specifically freestanding, single-tenant retail and industrial buildings, and earning a rental income in exchange. Realty Income's business model is secure due to its diverse global client base. This includes well-known retail and logistics names such as Walmart (WMT), CVS Health (CVS), FedEx (FDX), Amazon (AMZN), Tesco (TSCDY), and Walgreens Boots Alliance (WBA), among others. This diversification across geography and industry ensures that Realty Income is not overly reliant on any single tenant or sector, which is a critical strength in uncertain times. What truly differentiates Realty Income is its monthly dividend. Most dividend-paying companies pay out cash quarterly. In its 56 years of operation, the company has paid 656 monthly dividend payments, earning it the nickname 'The Monthly Dividend Company.' Its dividend yield hovers around 6.1%, higher than the real estate sector's average of 4.5%. In March, the company raised its monthly cash dividend to $0.2685 per share from $0.2680. This was the company's 130th dividend increase since its New York Stock Exchange listing in 1994. What's more, Realty Income has earned the title of a Dividend Aristocrat, having increased its dividend for the last 30 years in a row. Rock-Solid Financial Structure Realty Income's rock-solid financial structure keeps the dividend train running regardless of market conditions. The company consistently maintains occupancy rates of more than 98%. Tenants sign long-term leases that last around 9.3 years, with built-in rent escalators. Furthermore, the leases require tenants to cover property-related expenses such as taxes, maintenance fees, and insurance, among others. Consumer staples, pharmacies, and convenience stores are tenants that thrive in all economic climates, making Realty Income more resilient than many competitors. The REIT's payout is determined using adjusted funds from operations (AFFO), which is a more accurate measure of cash flow than traditional earnings used for a non-REIT. Realty Income consistently maintains a dividend payout ratio that is about 75.6% of AFFO, ensuring that it does not overextend itself while also retaining funds for growth strategies. In the fourth quarter, Realty Income's total revenue of $1.34 billion increased by 25% year-over-year. AFFO per share of $1.05 represented a 4% increase from Q4 2023. For the full year 2024, total revenue of $5.27 billion increased 29.5% year-over-year. AFFO increased by 4.8%, reaching $4.19 per share. Management highlighted that in 2024, Realty Income's annual AFFO per share increased for the 14th year in a row. Furthermore, the board of directors approved a $2 billion share repurchase program, showcasing confidence in the company's future prospects. Looking ahead, the company expects AFFO to be between $4.22 and $4.28 per share, a 1.4% increase over 2024. Is O Stock a Buy on Wall Street? Overall, Wall Street rates Realty Income stock as a 'Moderate Buy.' Out of the 23 analysts who cover the stock, five rate it a 'Strong Buy,' one a 'Moderate Buy,' and 17 a 'Hold.' The average target price for the stock is $60.89, 13% higher than current levels. The Street-high estimate of $65.50 implies a nearly 24% increase over the next 12 months. With a portfolio designed to weather economic storms, a track record of dividend growth, and an expanding global footprint, Realty Income is the type of stock that allows you to sleep well at night while still receiving a monthly check. For long-term investors looking for consistent monthly income, strong management, and conservative financials, Realty Income is an appealing option.
