Delighting its shareholders, retail REIT Realty Income Corporation (O - Free Report) has announced a hike in its common stock monthly cash dividend. This is the company’s 96th dividend increase since its NYSE listing in 1994. The company will now pay 21.95 cents per share compared with 21.90 cents paid earlier.
Realty Income will pay the dividend on Apr 13 to shareholders on record as of Apr 2. The latest dividend rate marks an annualized amount of $2.634 per share versus the prior rate of $2.628 per share.
Solid dividend payouts are arguably the biggest enticement for REIT investors and Realty Income remains committed to boosting shareholders’ wealth. The company enjoys a trademark on the phrase “The Monthly Dividend Company”. The April 2018 dividend payment not only marks its 573 consecutive monthly dividend payouts throughout its 49-year operating history, but also 82 consecutive quarterly increases as well as payment of more than $5.3 billion.
In fact, the company has generated a compound average annual dividend growth of around 4.7% since its listing on the NYSE. Given its financial position and lower debt-to-equity ratio compared to the industry, this dividend rate is likely to be sustainable.
Apart from Realty Income, some other REITs which announced dividend hikes in recent months are Digital Realty (DLR - Free Report) , Prologis Inc. (PLD - Free Report) and Simon Property Group, Inc. (SPG - Free Report) .
Realty Income is well poised to grow and reward shareholders backed by its superior business model. This freestanding retail REIT 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 acquisitions have helped the company maintain high occupancy levels consistently. In fact, since 1996, its occupancy level has never been below 96%. For 2018 too, the company projects occupancy to remain at approximately 98%. Additionally, its same-store rent growth underlines limited operational volatility.
The company continues to maintain a conservative capital structure. It has modest leverage, robust liquidity and continued access to attractively priced equity and debt capital. Moreover, it has a well-laddered debt maturity schedule.
Nonetheless, the company’s substantial exposure to single-tenant assets raises risks associated with tenant default. Further, generation of notable rental revenues from assets leased to drug stores and rate hike add to its woes.
Shares of Realty Income have outperformed the industry it belongs to, in the past month. This Zacks Rank #3 (Hold) company’s shares have gained 4.4% while the industry inched up 0.6% during this time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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