Realty Income: 81 Dividend Increases

09/21/2015 7:00 am EST


Benjamin Shepherd

Analyst, Breakthrough Tech Profits, Global Income Edge and Personal Finance

After a stellar 2014 in which real estate investment trusts outperformed every other asset class, they haven’t been particularly popular this year, observes Benjamin Shepherd, editor of Personal Finance.

With growing speculation that the Federal Reserve may raise rates later this year, REITs and other high yielders are having a tough time.

Realty Income (O) owns over 4,000 properties, leased to over 200 different commercial tenants.

Operationally speaking, the REIT is unfazed by those worries, with both revenue and earnings up 11% in the second quarter.

Revenue jumped from $228.6 million to $253.9 million year-over-year, while net income bounced from $51.4 million to $59.3 million.

Realty Income also completed acquisitions and developments worth $721 million. Occupancy was another high point of the report, coming in at 98.2%.

The REIT pushed through some pretty meaningful rent increases, with rents on new leases—compared with expiring leases—up 5.7%, while same-store rents increased 1.5%.

That solid performance helped fund Realty Income’s 81st dividend increase, totaling 4% to $0.569, marking 71 consecutive quarters of growth.

The stock is now more than 13% off its 52-week high, which it hit at the end of January, thanks to growing worries over rates. But I don’t believe Realty Income has much to worry about.

Higher rates will certainly produce bigger transaction costs, but this isn’t the first time the REIT has had to deal with rising rates, having increased its dividend for 17 years in a row.

Buy Realty Income, currently yielding 4.8%, under $50 with a stop-loss at $40.

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