Realty Income: 585 Consecutive Payouts

10/02/2019 5:00 am EST

Focus: REITS

Jim Powell

Principal Analyst, Global Changes & Opportunities

Many investors have a greater need for reliable income than they do for capital gains. Of course, finding income becomes much more difficult every time the Fed reduces interest rates, observes Jim Powell, editor of Global Changes & Opportunities Report.

In my opinion, the best income strategy is to avoid bonds, CDs, and fixed income funds altogether and buy blue chip dividend stocks. Many blue chips pay over twice what secure fixed income securities pay. Although the stocks offer more risk, it’s low for top-quality companies that have long histories of paying their dividends even during tough economic times.

Several of my previous recommendations look especially well-suited for investors in need of income. For many investors, the gold standard income producer is Realty Income Corporation (O) — a S&P 500 REIT that manages over 5,900 properties owned under long-term lease agreements with commercial tenants.

The company is diversified over 49 industries in 49 states — which helps ensure the stability of the company’s revenue — and its dividends.

Realty Income also writes “net leases” in which the tenant is responsible for paying both the rent and the major operating expenses. The company currently pays a 3.68% dividend. Amazingly, the current dividend was the 585th consecutive payout. The company has a compound annualized dividend growth of 4.6% since 1994.

As an income stock, I didn’t expect much in the way of capital gains from Realty Income  when we purchased it in October 2016; however, the shares are up 13.0% — a respectable gain.

With income stocks we must turn our expectations for benefits around. Instead of considering dividends as an added attraction to capital gains, we should consider capital gains to be an added attraction to our dividends.

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