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Here's Why You Should Retain Realty Income (O) Stock Now
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Realty Income’s (O - Free Report) portfolio is well diversified with respect to tenant, industry, geography and property type. The company’s properties are located in all U.S. states, Puerto Rico, the United Kingdom and Spain. Moreover, with top industries selling essential goods and services and accretive buyouts, the company is well-poised to grow.
As of Mar 31, 2022, Realty Income derived roughly 93% of its annualized retail contractual rental revenues from its tenants with a service, non-discretionary and/or low-price-point component to their business. Such businesses are less susceptible to economic recessions and competition from Internet retailing, thereby ensuring a steady stream of cashflows.
Realty Income’s solid underlying real estate quality and prudent underwriting at acquisition have helped the company maintain high occupancy levels consistently. In fact, since 1996, the company’s occupancy level has never been below 96%. As of Mar 31, 2022, its portfolio occupancy of 98.6% expanded 60 basis points (bps) year over year.
A high volume of property acquisition of well-located properties at decent investment spreads aids the company’s external growth and offers it a competitive edge over its net lease industry. During the first quarter of 2022, it invested $1.56 billion in 213 properties and properties under development or expansion, including $796.4 million in Europe.
Furthermore, solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Realty Income remains committed to that. Shareholders have been rewarded with 98 consecutive quarterly dividend hikes, the latest being in March 2022. Notably, the company enjoys a trademark of the phrase “The Monthly Dividend Company” and is also one of the 65 companies in the elite S&P 500 Dividend Aristocrats® Index. Moreover, this retail REIT has witnessed compound average annual dividend growth of 4.4% since its listing on the NYSE. The latest dividend rate is likely to be sustainable based on its strong financial position and lower debt-to-equity ratio compared with the industry.
Shares of Realty Income have appreciated 1.7% in the past three months against the industry’s fall of 8.9%.
Image Source: Zacks Investment Research
However, as of Mar 31, 2022, Realty Income’s tenant roster comprised 99% of single-tenant properties, thereby exposing it to the risks associated with single-tenant assets. In case of the financial failure of, or default in payment by a single tenant, the company’s rental revenues from that property and the value of the property suffer significantly.
Also, the adoption of e-commerce by consumers has lowered the demand for the retail real estate space. With more and more consumers preferring online shopping, the demand for physical stores has taken a backfoot and the competition has intensified. Owing to this, retailers are either opting for store closures or filing for bankruptcies, adding to Realty Income’s concerns.
The estimate revisions trend for 2022 funds from operations (FFO) per share does not indicate a favorable outlook for the company as it has moved south by 1% in the past two months to $3.91.
The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved 1.8% upward in the past two months to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Rexford Industrial Realty’s current-year FFO per share has moved 1.6% northward in the past two months to $1.93. REXR carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 51.5% over the past two months to $2.09. OUT carries a Zacks Rank #2, currently.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Here's Why You Should Retain Realty Income (O) Stock Now
Realty Income’s (O - Free Report) portfolio is well diversified with respect to tenant, industry, geography and property type. The company’s properties are located in all U.S. states, Puerto Rico, the United Kingdom and Spain. Moreover, with top industries selling essential goods and services and accretive buyouts, the company is well-poised to grow.
As of Mar 31, 2022, Realty Income derived roughly 93% of its annualized retail contractual rental revenues from its tenants with a service, non-discretionary and/or low-price-point component to their business. Such businesses are less susceptible to economic recessions and competition from Internet retailing, thereby ensuring a steady stream of cashflows.
Realty Income’s solid underlying real estate quality and prudent underwriting at acquisition have helped the company maintain high occupancy levels consistently. In fact, since 1996, the company’s occupancy level has never been below 96%. As of Mar 31, 2022, its portfolio occupancy of 98.6% expanded 60 basis points (bps) year over year.
A high volume of property acquisition of well-located properties at decent investment spreads aids the company’s external growth and offers it a competitive edge over its net lease industry. During the first quarter of 2022, it invested $1.56 billion in 213 properties and properties under development or expansion, including $796.4 million in Europe.
Furthermore, solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Realty Income remains committed to that. Shareholders have been rewarded with 98 consecutive quarterly dividend hikes, the latest being in March 2022. Notably, the company enjoys a trademark of the phrase “The Monthly Dividend Company” and is also one of the 65 companies in the elite S&P 500 Dividend Aristocrats® Index. Moreover, this retail REIT has witnessed compound average annual dividend growth of 4.4% since its listing on the NYSE. The latest dividend rate is likely to be sustainable based on its strong financial position and lower debt-to-equity ratio compared with the industry.
Shares of Realty Income have appreciated 1.7% in the past three months against the industry’s fall of 8.9%.
Image Source: Zacks Investment Research
However, as of Mar 31, 2022, Realty Income’s tenant roster comprised 99% of single-tenant properties, thereby exposing it to the risks associated with single-tenant assets. In case of the financial failure of, or default in payment by a single tenant, the company’s rental revenues from that property and the value of the property suffer significantly.
Also, the adoption of e-commerce by consumers has lowered the demand for the retail real estate space. With more and more consumers preferring online shopping, the demand for physical stores has taken a backfoot and the competition has intensified. Owing to this, retailers are either opting for store closures or filing for bankruptcies, adding to Realty Income’s concerns.
Analysts seem bearish about this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The estimate revisions trend for 2022 funds from operations (FFO) per share does not indicate a favorable outlook for the company as it has moved south by 1% in the past two months to $3.91.
Stocks to Consider
Some better-ranked stocks in the REIT sector are Prologis (PLD - Free Report) , Rexford Industrial Realty (REXR - Free Report) and OUTFRONT Media (OUT - Free Report) .
The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved 1.8% upward in the past two months to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Rexford Industrial Realty’s current-year FFO per share has moved 1.6% northward in the past two months to $1.93. REXR carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 51.5% over the past two months to $2.09. OUT carries a Zacks Rank #2, currently.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.