Walgreens, 7-Eleven, and Dollar Tree are Realty Income's biggest retail and commercial clients. The stock has underperformed the S&P 500 over the past five years, returning 20% against 100%.
Dividend seekers love the stock despite its recent underperformance. Realty Income, known as "The Monthly Dividend Company," has paid a monthly dividend for 54 years and raised it 123 times since becoming public in 1994. Company dividends are $0.2565 each month, or 5.2% annually.
Beyond its payout, the business invested $9 billion in 2023, including $950 million in the Bellagio Las Vegas, to grow. Realty Income also announced a $9.3 billion all-stock merger with Spirit Realty Capital, a single-tenant real estate REIT, slated to completion in 2024. Combining will create the fourth-largest REIT.
Recent investments would boost Realty Income's trailing-12-month revenue and net income to $3.9 billion and $881 million, respectively, record yearly results. However, the company's net debt has soared. After three years, Realty Income's net debt rose 141% to $20.3 billion in its latest quarter.
Given rising interest rates, investors might expect increased interest costs. Realty Income spent $660 million on interest last year, another record.
At the conclusion of the quarter, occupancy was 98.8%, barely shy of the company's recent record of 99%. Hope remains. Investors will be excited by the exceptional growth, but management's debt management will be important.
REIT stocks favor dividends above share price appreciation, therefore not everyone should invest. REITs offer real estate exposure without property management.
These two equities pay regularly and have solid portfolios despite having movie theater exposure. EPR Properties and Realty Income are good monthly income investments.