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Diversified Tenant Base: Is Realty Income Truly Recession-Proof?

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Key Takeaways

  • Realty Income holds 98% of assets in triple-net leases, ensuring predictable cash flows.
  • The company leases to 1,600+ clients across 91 industries, with top tenants at 35% of rent.
  • About 90% of rent stems from recession- and e-commerce-resilient tenant categories.

Realty Income’s (O - Free Report) tenant strategy is the foundation of its stability and income consistency. As of second-quarter 2025, about 98% of assets are structured as single-tenant, triple-net-lease properties, transferring operating expenses such as taxes, insurance, and maintenance directly to tenants, yielding a near-100% gross margin across the portfolio. This approach creates predictable cash flows, minimizes cost volatility, and sustains the company’s identity as “The Monthly Dividend Company.” Diversification within the tenant base enhances this strength. 

The company leases to more than 1,600 clients across 91 industries, with the top 20 tenants contributing only around 35% of rent. This broad footprint reduces reliance on any single operator, while positioning Realty Income to capture steady demand from categories like grocery, convenience, and home improvement. These industries provide essential, recurring services that support occupancy and rent coverage even during downturns.

The composition of rent further reinforces stability. Roughly 73% of annualized base rent comes from tenants offering non-discretionary goods or low-price-point and service-oriented retail. Approximately 90% of rent is considered resilient against both recessionary conditions and the rise of e-commerce, anchoring the portfolio in tenant categories that can withstand secular and cyclical pressures.

Still, concentration risks persist. Retail accounts for nearly 80% of Realty Income’s portfolio, leaving exposure to store rationalization trends and margin compression among physical operators. Dependence on large national chains such as Walgreens, Dollar General, and 7-Eleven, while creditworthy today, may create vulnerability if industry dynamics weaken or consolidation intensifies.

Overall, Realty Income’s tenant focus, combining essential retail exposure, diversified industries, and long-term triple-net structures, underpins stable adjusted funds from operations generation and supports its capacity for consistent dividend growth.

How Regency and Kimco Focus on Essential Tenants?

Regency Centers (REG - Free Report) centers its tenant strategy on grocery-anchored, necessity-based, open-air shopping centers. Approximately 85% of Regency Centers’ 480-plus properties are anchored by grocers, with restaurants representing another 20% of annual base rent. This focus delivers stable foot traffic, recurring income, and resilience against e-commerce disruption.

Kimco Realty (KIM - Free Report) emphasizes grocery-anchored, open-air shopping centers serving necessity-based tenant categories that drive frequent visits. As of the second quarter of 2025, Kimco’s grocery-anchored contributions hit 86% of annual base rent, with record-high small-shop occupancy of 92.2% and Same-Property NOI growth of 3.1%.

O’s Price Performance, Valuation and Estimates

Shares of Realty Income have risen more than 11% year to date against the industry’s decline of 6.7%.

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From a valuation standpoint, O trades at a forward 12-month price-to-FFO of 13.68, below the industry. It carries a Value Score of D.

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Image Source: Zacks Investment Research

The Zacks Consensus Estimate for O’s earnings has been revised marginally downward over the past 30 days.

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Image Source: Zacks Investment Research

At present, Realty Income carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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