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Is Realty Income's (O) Latest Dividend Hike Sustainable?

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Realty Income Corporation (O - Free Report) announced its 120th common stock monthly dividend hike since its NYSE listing in 1994. Delighting its shareholders, the company will pay 25.50 cents per share in dividend compared with 25.45 cents paid earlier.

The increased dividend will be paid out on Apr 14, to shareholders on record as of Apr 3, 2023. The latest dividend rate marks an annualized amount of $3.060 per share compared with the prior rate of $3.054. Based on the company’s share price of $63.22 on Mar 14, the latest hike results in a dividend yield of 4.84%.

Solid dividend payouts are the biggest enticements for real estate investment trust (REIT) investors, and Realty Income is committed to boosting its shareholder wealth. This retail REIT holds the trademark of the phrase “The Monthly Dividend Company.”

Though the latest hike marks a marginal increase from the prior dividend, the latest dividend announced will be the company’s 633rd consecutive monthly dividend payout in its 54-year operating history. Moreover, the latest hike reflects O’s ability to generate decent cash flow through its operating platform and high-quality portfolio.

Realty Income made 102 consecutive quarterly dividend hikes. This retail REIT has witnessed compound average annual dividend growth of 4.4% since its listing on the NYSE. Check Realty Income’s dividend history here.

O derives more than 90% of its annualized retail contractual rental revenues from tenants with a service, non-discretionary and low-price-point component to their business. Such businesses are less susceptible to economic recessions and competition from Internet retailing. These provide more reliable streams of income, which boost the stability of rental revenues and generate predictable cash flows. Also, the company’s diversified tenant base, accretive buyouts and robust balance sheet bode well for its growth.

Realty Income exited 2022 with $1.7 billion in liquidity. The company ended the quarter with low leverage and high coverage metrics. Further, Realty Income has a well-laddered debt-maturity schedule with a weighted average maturity of 6.2 years.

Manageable near-term maturities and ample liquidity provide the company with the financial flexibility to tide over any mayhem and bank on growth scopes. O has a credit rating of A- (Stable) and A3 (Stable) from Standard & Poor’s and Moody’s, respectively, enabling it to procure debt financing at attractive costs.

Shares of this Zacks Rank #3 (Hold) company have declined 0.4% in the past three months, narrower than its industry’s decrease of 0.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Stocks to Consider

Some better-ranked stocks from the retail REIT sector are Federal Realty Investment Trust (FRT - Free Report) and Essential Properties Realty Trust (EPRT - Free Report) , each carrying a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Federal Realty’s ongoing year’s FFO per share has been revised 1.1% upward over the past month to $6.45.

The Zacks Consensus Estimate for Essential Properties Realty’s 2023 FFO per share has been revised a cent upward over the past month to $1.64.

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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