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Here's Why You Should Hold on to Realty Income (O) Stock Now
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Realty Income (O - Free Report) is likely to remain on the growth curve with strategic acquisitions. During the nine-month period ended Sep 30, 2017, the company invested around $956.9 million in 177 new properties and properties under development or expansion, situated in 35 states. The assets are fully leased with a weighted average lease term of approximately 14.9 years.
Per a video interview at REITworld 2017 with Nareit, the company’s CEO, John Case, mentioned that the company continues to witness solid investment opportunities and expects to complete around $1.5 billion of acquisitions in 2017. In fact, according to him, a bigger number of acquisitions are backing the 6% earnings per share increase projected by the company for the year.
Moreover, in December, Realty Income announced a hike in its common stock monthly cash dividend, giving shareholders another reason to rejoice. This marks the company’s 94th dividend increase since its NYSE listing in 1994. The company will now pay 21.25 cents per share against 21.20 cents paid earlier. The increased dividend will be paid on Jan 12, 2018, to shareholders of record as of Jan 2, 2018.
Notably, the company enjoys a trademark on the phrase “The Monthly Dividend Company”. The January 2018 dividend not only marks its 570th consecutive monthly payout in its 48-year operating history but also is the 81st consecutive quarterly increase. In fact, the company has generated a compound average annual dividend growth of around 4.6% since its listing on the NYSE. Given its financial position and lower debt-to-equity ratio compared with the industry, this dividend rate is likely to be sustainable.
Realty Income’s portfolio comprised 5,062 properties, situated in 49 states and Puerto Rico as of Sep 30, 2017, containing more than 86.4 million leasable square feet of space. These properties are leased to 251 different commercial tenants, belonging to 47 separate industries. The company leases its properties under long-term, net lease agreements.
Lately, shrinking footfall at malls amid shift of consumers toward online channels, store closures and bankruptcy of retailers have emerged as a pressing concerns for most retail REITs including Simon Property Group, Inc. (SPG - Free Report) , GGP Inc. and Macerich Company (MAC - Free Report) . However, not all are facing the brunt, as a few among these companies are still gaining even in the tepid scenario, thanks to the business models.
In fact, this freestanding retail REIT, Realty Income, derives more than 90% of its annualized retail rental revenues from tenants belonging to service, non-discretionary and low-price retail business. Such businesses are less susceptible to economic recessions and competition from Internet retailing.
Additionally, 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%. Additionally, its same-store rent growth has displayed limited operational volatility.
The company also maintains a conservative capital structure. It has modest leverage, robust liquidity and continued access to attractively priced equity and debt capital. Additionally, it has a well-laddered debt maturity schedule.
However, Realty Income’s substantial exposure to single-tenant assets raises risks associated with tenant default. Moreover, despite the company’s efforts to diversify the tenant base, its tenants in the drug store industry accounted for around 10.8% of its rental revenue in third-quarter 2017. This makes the company’s results susceptible to any adverse changes in this industry, because a downturn in the industry or a change in legislation relating to prescription drugs, could substantially affect Realty Income’s tenants and in turn affect the revenue stream of the REIT. Further, rate hike add to its woes.
Shares of Realty Income have outperformed the industry it belongs to, in a month’s time. This Zacks Rank #3 (Hold) company’s shares have ascended 3.0%, while the industry registered growth of 2.3% during this time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Image: Bigstock
Here's Why You Should Hold on to Realty Income (O) Stock Now
Realty Income (O - Free Report) is likely to remain on the growth curve with strategic acquisitions. During the nine-month period ended Sep 30, 2017, the company invested around $956.9 million in 177 new properties and properties under development or expansion, situated in 35 states. The assets are fully leased with a weighted average lease term of approximately 14.9 years.
Per a video interview at REITworld 2017 with Nareit, the company’s CEO, John Case, mentioned that the company continues to witness solid investment opportunities and expects to complete around $1.5 billion of acquisitions in 2017. In fact, according to him, a bigger number of acquisitions are backing the 6% earnings per share increase projected by the company for the year.
Moreover, in December, Realty Income announced a hike in its common stock monthly cash dividend, giving shareholders another reason to rejoice. This marks the company’s 94th dividend increase since its NYSE listing in 1994. The company will now pay 21.25 cents per share against 21.20 cents paid earlier. The increased dividend will be paid on Jan 12, 2018, to shareholders of record as of Jan 2, 2018.
Notably, the company enjoys a trademark on the phrase “The Monthly Dividend Company”. The January 2018 dividend not only marks its 570th consecutive monthly payout in its 48-year operating history but also is the 81st consecutive quarterly increase. In fact, the company has generated a compound average annual dividend growth of around 4.6% since its listing on the NYSE. Given its financial position and lower debt-to-equity ratio compared with the industry, this dividend rate is likely to be sustainable.
Realty Income’s portfolio comprised 5,062 properties, situated in 49 states and Puerto Rico as of Sep 30, 2017, containing more than 86.4 million leasable square feet of space. These properties are leased to 251 different commercial tenants, belonging to 47 separate industries. The company leases its properties under long-term, net lease agreements.
Lately, shrinking footfall at malls amid shift of consumers toward online channels, store closures and bankruptcy of retailers have emerged as a pressing concerns for most retail REITs including Simon Property Group, Inc. (SPG - Free Report) , GGP Inc. and Macerich Company (MAC - Free Report) . However, not all are facing the brunt, as a few among these companies are still gaining even in the tepid scenario, thanks to the business models.
In fact, this freestanding retail REIT, Realty Income, derives more than 90% of its annualized retail rental revenues from tenants belonging to service, non-discretionary and low-price retail business. Such businesses are less susceptible to economic recessions and competition from Internet retailing.
Additionally, 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%. Additionally, its same-store rent growth has displayed limited operational volatility.
The company also maintains a conservative capital structure. It has modest leverage, robust liquidity and continued access to attractively priced equity and debt capital. Additionally, it has a well-laddered debt maturity schedule.
However, Realty Income’s substantial exposure to single-tenant assets raises risks associated with tenant default. Moreover, despite the company’s efforts to diversify the tenant base, its tenants in the drug store industry accounted for around 10.8% of its rental revenue in third-quarter 2017. This makes the company’s results susceptible to any adverse changes in this industry, because a downturn in the industry or a change in legislation relating to prescription drugs, could substantially affect Realty Income’s tenants and in turn affect the revenue stream of the REIT. Further, rate hike add to its woes.
Shares of Realty Income have outperformed the industry it belongs to, in a month’s time. This Zacks Rank #3 (Hold) company’s shares have ascended 3.0%, while the industry registered growth of 2.3% during this time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>