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Realty Income (O) Hikes Monthly Dividend for 107th Time

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Realty Income Corporation (O - Free Report) recently announced its 107th common stock monthly dividend hike since the company’s NYSE listing in 1994. The company will now pay 23.35 cents per share compared with the 23.30 cents paid earlier.

The increased dividend will be paid on Jul 15, to shareholders on record as of Jul 1, 2020. The latest dividend rate marks an annualized amount of $2.802 per share versus the prior rate of $2.796 per share. Based on the company’s share price of $62.85 on Jun 9, it results in a dividend yield of 4.5%.

Solid dividend payouts are the biggest enticement for REIT investors and Realty Income remains committed to boosting shareholder wealth. The company enjoys a trademark of the phrase “The Monthly Dividend Company”.

The latest hike comes by a marginal figure from the prior dividend paid, but the July dividend payments marks the company’s 600 consecutive monthly dividend payments throughout its 51-year operating history. Moreover, the company has made 91 consecutive quarterly dividend hikes, which is encouraging. This retail REIT has witnessed compound average annual dividend growth of 4.5% since its listing on the NYSE.

The latest hike reflects Realty Income’s ability to generate decent cash-flow growth through its operating platform and high-quality portfolio. With a current cash-flow growth rate of 12.23%, ahead of the industry’s average of 0.37%, the increased dividend is likely to be sustainable.

Remarkably, the escalating number of coronavirus cases has forced several retailers to close their stores to contain the spread of the virus. Some retailers have also reduced store hours, while many others are keeping their e-retail operations running as consumers are now increasingly opting for online purchases.

As a result, retail REITs, which have been already battling store closures and bankruptcy issues, stand hugely affected because retail businesses are highly dependent on customer traffic and consumers are now consciously avoiding crowds in large public spaces.  Even the likes of Simon Property Group, Inc. (SPG - Free Report) , Kimco Realty Corporation (KIM - Free Report) and Macerich Company (MAC - Free Report) were not immune and are making aggressive attempts to adapt to the changing scenario.

However, Realty Income recently announced that as of Jun 1, 2020, the company collected 82% of contractual rent due for May across its total portfolio. A solid tenant roster likely enabled the company to collect a significant rent amount despite the ongoing pandemic. The company accumulated 82.1% of rent from its top 20 tenants and 98.2% from investment grade tenants.

The company also reported rental receipts for April with 84.2% of the contractual rent collected for the month across its total portfolio as of Jun 1, 2020. Earlier, April rent collections through May 1 stood at 82.9%.

Realty Income’s top four industries (representing around 37% of annualized rent), namely convenience stores (accounting for 11.9% of rental revenues for first-quarter 2020), drug stores (9%), dollar stores (8%) and grocery stores (7.7%) sell ‘essential’ goods and therefore continued to thrive amid the pandemic, which in turn, might have aided rent collections for April and May.

However, tenants from the company’s theater, health and fitness, restaurant, and child care industries are being affected by the government-mandated shutdowns and social-distancing requirements. Further, the company is in constant talks with tenants seeking rent-relief requests and deferrals.

Shares of this Zacks Rank #3 (Hold) company have declined 13% over the past year, narrower than its industry’s decrease of 16.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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