Realty Income Corporation (O - Free Report) recently announced its 99th common stock monthly dividend hike since the company’s NYSE listing in 1994. The company will now pay 22.1 cents per share compared with the 22.05 cents paid earlier.
Realty Income will pay the dividend on Jan 15 to shareholders on record as of Jan 2, 2019. The latest dividend rate marks an annualized amount of $2.652 per share versus the prior rate of $2.646 per share. Based on the company’s share price of $66.30 on Dec 11, this results in a dividend yield of around 4.0%.
Admittedly, solid dividend payouts are 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”.
In fact, although the latest hike came by a marginal figure, this marks the company’s 85 consecutive quarterly hikes, as well as 582 consecutive monthly dividend payments throughout its 49-year operating history. In fact, this retail REIT has witnessed 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 to the industry, the latest dividend rate will likely to be sustainable.
Notably, 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, as well as competition from Internet retailing. This has helped the company differentiate itself at a time when declining mall traffic, store closures and bankruptcy of retailers have plagued the retail REIT sector, including Urban Edge Properties (UE - Free Report) , Taubman Centers, Inc. (TCO - Free Report) and Macerich Company (MAC - Free Report) .
Moreover, Realty Income’s accretive acquisitions and solid balance-sheet strength augur well for long-term growth. In fact, prudent underwriting at acquisitions has helped maintain high occupancy levels consistently. Additionally, its same-store rent growth underlines limited operational volatility.
Nonetheless, the company’s exposure to single-tenant assets raises risks associated with tenant default. Further, rate hike add to its woes. Also, the company’s dividend yield based on the latest hike is below the industry’s yield of 5.03%. This might affect its ability to draw investors’ attention to the stock, to some extent.
Shares of Realty Income have outperformed the industry it belongs to, in the past three months. This Zacks Rank #3 (Hold) stock has gained 14.1%, while the industry has declined 0.8% during the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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