Realty Income (O) hikes dividend 4% & offers a high relative yield.

Realty Income’s (NYSE:O) dividend was increased by a solid 4% for a utility firm.  Its overall yield is 4.24%. The firm started paying a dividend in 1994.

Realty Income is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. The firm makes investments in commercial real estate. Realty Income Corporation was founded in 1969 and is based in Escondido, California.

Realty Income has maintained a solid three-year growth rate of dividends of 3.6 percent. Realty Income currently ranks 5th in dividend yield within the large cap REIT-Retail category. The monthly dividend for the February payment will be $0.2105 versus the prior year rate of $0.2025 per share. Realty Income Corp. does not qualify as one of our Top 100 Dividend Stocks.  (see below).

The dividend will be paid at the new higher rate on February 15, 2017, to shareholders of record at close of business on February 1, 2017. Realty Income is currently priced at $59.62. Listed in the table below are the monthly dividend payments since 2010.

Date Monthly Dividend
2/1/2017 0.2105
12/29/2016 0.203
11/29/2016 0.202
10/28/2016 0.202
9/29/2016 0.202
8/30/2016 0.202
7/28/2016 0.2
6/29/2016 0.2
5/27/2016 0.199
4/28/2016 0.199
3/30/2016 0.199
2/26/2016 0.199
1/28/2016 0.199
12/30/2015 0.191
11/27/2015 0.191
10/29/2015 0.191
9/29/2015 0.191
8/28/2015 0.19
7/30/2015 0.19
6/29/2015 0.19
5/28/2015 0.19
4/29/2015 0.19
3/30/2015 0.19
2/26/2015 0.189
1/29/2015 0.189
12/30/2014 0.183
11/26/2014 0.183
10/30/2014 0.183
9/29/2014 0.183
8/28/2014 0.183
7/30/2014 0.183
6/27/2014 0.183
5/29/2014 0.182
4/29/2014 0.182
3/28/2014 0.182
2/27/2014 0.182
1/30/2014 0.182
11/27/2013 0.182
10/30/2013 0.182
9/27/2013 0.182
8/29/2013 0.182
7/30/2013 0.182
6/27/2013 0.182
5/30/2013 0.181
4/29/2013 0.181
3/27/2013 0.181
2/27/2013 0.181
1/30/2013 0.181
12/28/2012 0.152
11/29/2012 0.151
10/31/2012 0.151
9/27/2012 0.151
8/30/2012 0.151
7/30/2012 0.146
6/28/2012 0.146
5/30/2012 0.146
4/27/2012 0.146
3/29/2012 0.146
2/28/2012 0.146
1/30/2012 0.146
12/28/2011 0.146
11/29/2011 0.145
10/28/2011 0.145
9/29/2011 0.145
9/1/2011 0.145
7/28/2011 0.145
6/29/2011 0.145
5/27/2011 0.145
4/28/2011 0.145
3/30/2011 0.145
2/25/2011 0.144
1/28/2011 0.144
12/30/2010 0.144
11/29/2010 0.144
10/28/2010 0.144
9/29/2010 0.144
8/30/2010 0.144
7/29/2010 0.144
6/29/2010 0.144
5/27/2010 0.143
4/29/2010 0.143
3/30/2010 0.143
2/25/2010 0.143
1/28/2010 0.143

Analysis of Realty Income is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 4.24% 56
Dividend Growth (3-7 year avg) 4.75% 308
Forward P/E 48.08 378
S&P Financial Rating BBB+ 160
Beta 0.70 50
Total Score 952

Additional Information;

% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate FFO 2016 P/FFO Ratio 10 yr P/FFO Low 10 yr P/FFO High 5 yr low Yield % 5 yr max Yield %
4.24% 3.6%  5.9% 3.05 19.55 9.2 25.1 3.27% 5.83%

Final Analysis;

Positives;

  • Realty Income’s dividend yield is above that of the S&P 500 Index.
  • Realty Income has paid out a dividend consecutively for the past 22 years.
  • Realty Income maintains an investment grade rating of BBB+.
  • Realty Income has maintained a three-year growth rate of dividends of 3.6 percent.

Negatives;

  • Realty Income’s current dividend yield (4.24%) is below its five-year average historical dividend yield.
  • Realty Income is trading above its ten-year average price/funds from operations (P/FFO) ratio.

Latest Earnings & Overall Analysis:

Realty Income issued its earnings data on October 26th. Realty Income reported third-quarter funds from operations (FFO) of $0.73 per share compared to $0.63 of the same quarter in 2015. Realty Income reported revenue up by 7.1% due to new development and acquisitions. Guidance for new projects and development was upped by $250 million to $1.5 billion. This was up from nearly $1 billion the prior year. In 2015, Realty Income acquired $1.26 billion worth of properties. Realty Income completed $1 billion in acquisitions last year, above expectations. To assist in the funding of the new buildings, Realty Income issued $600 million in bonds this past October. With its investment grade credit rating, the financing cost was 3%.

Realty Income owns single-tenant properties for the most part in the retail segment. It accounts for over three quarter’s of the firm’s revenue. It is a conservative REIT with a high relative dividend and modest growth prospects. We like the firm’s management team and its diversified operations. The REIT firm owns over 4,500 properties in 49 different states and Puerto Rico. Most are single-tenant, triple-net-leased retail locations. The new acquisitions have been in the office and industrial space. These type of properties now make up one-fifth of revenue.

 

Although we like the reliability of Realty Income and its high dividend yield, the firm is priced at a high forward FFO ratio.  In addition, its yield is well below the all-time high of 5.8% set back in early 2014.  We prefer REIT firms in the storage and healthcare areas at present, as they maintain both high dividends and low historical FFO ratios. Realty Income Corp. does not qualify as one of our Top 100 Dividend Stocks

Realty Income Corp. Dividend Yield Historical Chart (Click to enlarge)

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Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

One thought on “Realty Income (O) hikes dividend 4% & offers a high relative yield.

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