Recent Buy – Realty Income Corp (O)

I added to my position in Realty Income Corp (O) and doubled my stake. Realty is a REIT that invests in commercial real estate across the US. Realty Income Corp has long term leases with tenants that are spread across 200 companies and 47 industries. The Company has over 38,000 free-standing properties, typically under triple net leases (tenants pay taxes, maintenance and insurance).  The Company boasts a 98% occupancy rate with major tenants including FedEx, Walgreens, Family Dollar, LA Fitness, AMC Theatres and Diageo.

Corporate Profile (from Google Finance):

Realty Income Corporation (Realty Income) is an equity real estate investment trust (REIT). The Company is engaged in acquiring and owning freestanding retail and other properties that generate rental revenue under long-term lease agreements (primarily 10 to 20 years). The Company has in-house acquisition, leasing, legal, credit research, real estate research, portfolio management and capital markets. At December 31, 2011, it owned a diversified portfolio of 2,634 properties with an occupancy rate of 96.7%, or 2,547 properties leased and only 87 properties available for lease. It leased properties to 136 different retail and other commercial enterprises doing business in 38 separate industries. It properties are located in 49 states, with over 27.3 million square feet of leasable space, and with an average leasable space per property of approximately 10,400 square feet. In January 2013, it acquired American Realty Capital Trust.

Recent Buy Decision

Realty Income Corp has a track record of having paid 520 consecutive monthly dividends, 74 dividend increases and 65 consecutive quarterly increases. Realty Income has manageable debt, with a debt/equity ratio of 1.03, and more importantly, all of its debt is fixed-rate. So its interest payments will not be affected by rising interest rates unless new debt is undertaken by the company.
Realty Income Corp has not performed well in 2013 (down 7%) and the last few hours of the Dec 31 trading day saw more selloff which was probably last minute selling for tax purposes. I decided that it was a good buying opportunity and increased my stake from 30 to 60 shares. My current position provides me with $10.93 in monthly dividends and $131.16 in annual dividends.
A summary of the stock:
  • Symbol: NYSE: O
  • Quote: $37.33
  • 52-week Range: $36.58 – $55.48
  • Yield: 5.86%
  • 5-yr Dividend Growth Rate: 5.26%
  • P/FFO: 16.5
My full list of holdings can be found here.

10 thoughts on “Recent Buy – Realty Income Corp (O)

  1. I dare not to buy O.
    In the next few months I still prefer to wait and watch the development from O and HCP.

    The dividend yield is incredible – but that’s not enough for me.
    I´ll wait on rising prices.

    Cheers
    D-S

    • I think you can do better with buying Canadian REITs…such as Crombie @ 6.8% and H&R @ 6.3% plus you get your Dividend Tax Credit with Canadian stocks. But…..you have to watch interest rates, because REIT, Pipelines and Utilities will get smacked. Just my 2 cents.

    • Thanks for the tip, hotrunner.
      I am not familiar with Crombie…will need to check it out. H&R has a good yield but no and looked into it a year ago but cant remember why I dropped it. I have to revisit and re-evaluate. I liked Realty because of the combination of payout ratio, dividend growth rate, number of diversified ownership properties across the US. I am not too concerned about taxes as I am holding this in an RRSP account – so, no tax implications.

      You are right that the rising rates are bad news for REIT, pipelines and utilities. As I mentioned earlier, I think this is it for REIT investments for me for the foreseeable future. I do not intend to add any more utilities either. However, I would like to add some more to my pipeline holdings before I call quits on the sector/industry. I still think the long term gains outweigh the near term noise from interest rates when it comes to pipelines.

  2. I’m also hoping I can resist the lure of the REITs for a while. I really like them and they seem to get better every day, but rates will go up and that should bring more downward pressure. Plus I’m hoping to finally venture in a rental property, so that’s quite a bit of exposure to RE right there.

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