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Buy, Hold or Sell Realty Income Amid Rising Fed Rate Cut Expectations?
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Key Takeaways
Realty Income draws renewed interest as rate-cut expectations boost appeal for yield-focused investors.
O posted 98.7% occupancy, 1.3% same-store rent growth and strong rent recapture supporting dividend stability.
The REIT invested $1.4B in the quarter, nearly $1B in Europe, raising full-year investment guidance to $5.5B.
Growing expectations for Federal Reserve rate cuts have refocused investor attention on real estate investment trusts (REITs), and Realty Income Corporation (O - Free Report) is among the names seeing renewed interest. With markets increasingly pricing in easier monetary policy, possibly as soon as next month, income-focused stocks are finding support. Reports that NEC Director Kevin Hassett could replace Fed Chair Jerome Powell in 2026, or potentially earlier, have further fueled speculation that a more accommodative stance may be on the horizon.
For Realty Income, known widely for its monthly dividends and long-term net leases, shifts in interest-rate sentiment matter. Lower rates typically make yield-oriented stocks more attractive relative to bonds while also improving an REIT’s cost of capital. As expectations for rate cuts strengthen, investors naturally re-evaluate whether Realty Income stock is positioned for upside or if its valuation already reflects the potential benefits.
Year to date, Realty Income stock has climbed more than 6%, outperforming Essential Properties Realty Trust as well as the Zacks REIT and Equity Trust - Retail industry, but below Agree Realty’s rise of 6.6%.
Image Source: Zacks Investment Research
Yet, the question remains: Against this rate-driven environment, is Realty Income stock best positioned as a buy, hold or sell? To answer that, let us weigh its third-quarter 2025 results, dividend reliability and growth strategy.
Stable Operations Support Realty Income’s Dividend Appeal
Realty Income’s third-quarter performance highlights why the REIT remains a core income holding for many investors. It experienced a 98.7% occupancy rate and consistent same-store rent growth of 1.3%. The company’s essential retail focus, including convenience stores, drugstores and grocery operators, continues to provide dependable rental revenues even in uneven economic conditions.
A rent recapture rate of 103.5% on re-leased units further demonstrates the strength of its underlying real estate. With more than 15,500 properties across 92 industries, Realty Income benefits from scale and diversification that help reduce volatility. Its long track record of dividend growth, including 112 consecutive quarterly increases, remains a central part of the bull case for the stock.
Europe Leads O's Investment Momentum Increase
One of the most notable trends for Realty Income stock in 2025 has been its growing emphasis on Europe. The company invested $1.4 billion in the quarter, including nearly $1 billion in Europe at an attractive initial weighted average cash yield of 8.0%. This geographic mix is intentional, as European opportunities currently offer higher spreads and less competition than the U.S. market.
Management raised its full-year 2025 investment guidance to roughly $5.5 billion, up from the prior $5 billion, reflecting a robust global pipeline. Year-to-date sourcing has surpassed previous records, underscoring the opportunity set in the net-lease sector. Still, international expansion introduces currency considerations and regional risks that investors should be mindful of when evaluating the stock.
Balance Sheet Strength Aids Realty Income
Realty Income’s balance sheet remains solid, with net debt to annualized pro forma EBITDAre at 5.4X. The REIT also has $3.5 billion in liquidity, and its recent $800 million unsecured notes issuance at a 4.4% yield helped manage its cost of debt. These metrics support its investment-grade profile and help limit rate volatility.
Efficiency Gains for Realty Income, Credit Risks to Monitor
Realty Income continues to use data analytics and AI-driven tools to improve lease decisions, support asset sales and manage risk. Realty Income sold 140 properties in the quarter for $215 million, reflecting an active approach to recycling capital into higher-yield opportunities.
Still, management expects about 75 basis points of potential credit loss for 2025, primarily tied to tenants inherited from past mergers. While the credit watch list remains manageable, it is a reminder that even diversified REITs can face pockets of pressure in select industries.
O’s Estimate Revisions and Valuation
Estimate revisions reflect a somewhat mixed trend. Over the past 60 days, the Zacks Consensus Estimate for 2025 adjusted funds from operations (AFFO) per share has been trimmed modestly, while the 2026 projection has inched up slightly, reflecting a balanced view of growth and cost pressures.
Image Source: Zacks Investment Research
Valuation-wise, Realty Income stock is trading at a forward 12-month price-to-FFO of 12.88X, below the retail REIT industry average of 14.52X and its three-year median. O stock is also currently trading at a reasonable discount compared to its industry peers, Agree Realty Corporation and Essential Properties Realty Trust. This valuation disparity might not be as favorable as it seems. Agree Realty is trading at a forward 12-month price-to-FFO of 16.66X, while EPRT is trading at 15.58X.
However, its Value Score of D suggests that it may not be a bargain at current levels. Still, the company’s consistent dividend growth, underpinned by predictable rental income, keeps it appealing for long-term income-oriented investors.
Image Source: Zacks Investment Research
Realty Income: A Sensible Hold for Income Seekers
Realty Income continues to attract investors because it blends consistency, dependable income and measured expansion. Its wide-ranging tenant mix, strong balance sheet and long history of paying monthly dividends make it one of the more reliable REITs available today.
The company’s focus on essential-service retailers helps support steady cash flows, and its investment-grade financial profile adds another layer of resilience. Ongoing moves into new industries and international markets enhance its long-term growth path, while the prospect of upcoming Fed rate cuts could offer a near-term catalyst.
Even so, the stock’s valuation and moderate growth expectations keep it from screening as a compelling buy right now. Its stability also prevents it from being a sell. As such, Realty Income is best viewed as a hold, an anchor for income-oriented portfolios but not a source of outsized capital gains in the near term.
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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Buy, Hold or Sell Realty Income Amid Rising Fed Rate Cut Expectations?
Key Takeaways
Growing expectations for Federal Reserve rate cuts have refocused investor attention on real estate investment trusts (REITs), and Realty Income Corporation (O - Free Report) is among the names seeing renewed interest. With markets increasingly pricing in easier monetary policy, possibly as soon as next month, income-focused stocks are finding support. Reports that NEC Director Kevin Hassett could replace Fed Chair Jerome Powell in 2026, or potentially earlier, have further fueled speculation that a more accommodative stance may be on the horizon.
For Realty Income, known widely for its monthly dividends and long-term net leases, shifts in interest-rate sentiment matter. Lower rates typically make yield-oriented stocks more attractive relative to bonds while also improving an REIT’s cost of capital. As expectations for rate cuts strengthen, investors naturally re-evaluate whether Realty Income stock is positioned for upside or if its valuation already reflects the potential benefits.
With a current yield of 5.72%, Realty Income outpaces peers like Agree Realty Corporation (ADC - Free Report) at 4.23% and Essential Properties Realty Trust, Inc. (EPRT - Free Report) at 3.80%. Check Realty Income’s dividend history here.
Year to date, Realty Income stock has climbed more than 6%, outperforming Essential Properties Realty Trust as well as the Zacks REIT and Equity Trust - Retail industry, but below Agree Realty’s rise of 6.6%.
Image Source: Zacks Investment Research
Yet, the question remains: Against this rate-driven environment, is Realty Income stock best positioned as a buy, hold or sell? To answer that, let us weigh its third-quarter 2025 results, dividend reliability and growth strategy.
Stable Operations Support Realty Income’s Dividend Appeal
Realty Income’s third-quarter performance highlights why the REIT remains a core income holding for many investors. It experienced a 98.7% occupancy rate and consistent same-store rent growth of 1.3%. The company’s essential retail focus, including convenience stores, drugstores and grocery operators, continues to provide dependable rental revenues even in uneven economic conditions.
A rent recapture rate of 103.5% on re-leased units further demonstrates the strength of its underlying real estate. With more than 15,500 properties across 92 industries, Realty Income benefits from scale and diversification that help reduce volatility. Its long track record of dividend growth, including 112 consecutive quarterly increases, remains a central part of the bull case for the stock.
Europe Leads O's Investment Momentum Increase
One of the most notable trends for Realty Income stock in 2025 has been its growing emphasis on Europe. The company invested $1.4 billion in the quarter, including nearly $1 billion in Europe at an attractive initial weighted average cash yield of 8.0%. This geographic mix is intentional, as European opportunities currently offer higher spreads and less competition than the U.S. market.
Management raised its full-year 2025 investment guidance to roughly $5.5 billion, up from the prior $5 billion, reflecting a robust global pipeline. Year-to-date sourcing has surpassed previous records, underscoring the opportunity set in the net-lease sector. Still, international expansion introduces currency considerations and regional risks that investors should be mindful of when evaluating the stock.
Balance Sheet Strength Aids Realty Income
Realty Income’s balance sheet remains solid, with net debt to annualized pro forma EBITDAre at 5.4X. The REIT also has $3.5 billion in liquidity, and its recent $800 million unsecured notes issuance at a 4.4% yield helped manage its cost of debt. These metrics support its investment-grade profile and help limit rate volatility.
Efficiency Gains for Realty Income, Credit Risks to Monitor
Realty Income continues to use data analytics and AI-driven tools to improve lease decisions, support asset sales and manage risk. Realty Income sold 140 properties in the quarter for $215 million, reflecting an active approach to recycling capital into higher-yield opportunities.
Still, management expects about 75 basis points of potential credit loss for 2025, primarily tied to tenants inherited from past mergers. While the credit watch list remains manageable, it is a reminder that even diversified REITs can face pockets of pressure in select industries.
O’s Estimate Revisions and Valuation
Estimate revisions reflect a somewhat mixed trend. Over the past 60 days, the Zacks Consensus Estimate for 2025 adjusted funds from operations (AFFO) per share has been trimmed modestly, while the 2026 projection has inched up slightly, reflecting a balanced view of growth and cost pressures.
Image Source: Zacks Investment Research
Valuation-wise, Realty Income stock is trading at a forward 12-month price-to-FFO of 12.88X, below the retail REIT industry average of 14.52X and its three-year median. O stock is also currently trading at a reasonable discount compared to its industry peers, Agree Realty Corporation and Essential Properties Realty Trust. This valuation disparity might not be as favorable as it seems. Agree Realty is trading at a forward 12-month price-to-FFO of 16.66X, while EPRT is trading at 15.58X.
However, its Value Score of D suggests that it may not be a bargain at current levels. Still, the company’s consistent dividend growth, underpinned by predictable rental income, keeps it appealing for long-term income-oriented investors.
Image Source: Zacks Investment Research
Realty Income: A Sensible Hold for Income Seekers
Realty Income continues to attract investors because it blends consistency, dependable income and measured expansion. Its wide-ranging tenant mix, strong balance sheet and long history of paying monthly dividends make it one of the more reliable REITs available today.
The company’s focus on essential-service retailers helps support steady cash flows, and its investment-grade financial profile adds another layer of resilience. Ongoing moves into new industries and international markets enhance its long-term growth path, while the prospect of upcoming Fed rate cuts could offer a near-term catalyst.
Even so, the stock’s valuation and moderate growth expectations keep it from screening as a compelling buy right now. Its stability also prevents it from being a sell. As such, Realty Income is best viewed as a hold, an anchor for income-oriented portfolios but not a source of outsized capital gains in the near term.
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.