Realty Income: A Dividend that Impresses

Realty Income sparked interest among many investors in 2023, particularly due to its impressive dividend policy, which grows regularly. The leading Real Estate Investment Trust (REIT) has recently been included multiple times in my portfolio, most recently just last week. The main reason lies in the attractive and continuously increasing dividend. The current valuation of the REIT continues to offer incentives for further investments, and there is potential for additional purchases. The following aspect particularly illustrates why I keep adding shares. Realty Income is known for its monthly dividend payments, which especially appeal to investors who prefer passive income. With a dividend yield of about 5.7%, it significantly surpasses the S&P 500, whose yield is only 1.2%. This above-average revenue source rests on a solid foundation. The company has a diversified real estate portfolio, secured through long-term net lease agreements with reputable companies. These contracts obligate the tenants to cover all operating costs, ensuring a steady rental income growth for Realty Income. Approximately 75% of its adjusted operating funds are distributed as dividends, a conservative figure for a REIT, leaving room for further investments. Additionally, an excellent credit rating strengthens the stable foundation of the dividend policy. Recently, Realty Income announced its 128th dividend increase since its IPO in 1994, demonstrating its sustained growth capability. Over the last 30 years, the company has increased its dividend quarterly 109 times in a row. The dividend growth rate was 4.2% annually. Thanks to remarkably stable earnings development, the REIT was able to grow continuously, with an annual increase in adjusted FFO per share of 5%. Realty Income plans to continue growing at a low to mid-single-digit level. The existing portfolio is expected to contribute about 1% annually to FFO growth through contractually agreed rent increases. Due to its financial strength, the company can continuously invest in new assets, with a growth potential extending to commercial real estate in the USA and Europe valued at nearly $14 trillion. Realty Income is also expanding into new investment areas such as gaming and data centers, expanding its commitment in Europe, and has introduced new platforms for credit and private capital investments.