One of the most popular real estate investment trusts (REITs) among institutional and retail investors is Realty Income Corp (NYSE: O), and for good reason. The stock has produced a total return of 7.48% over the past 12 months compared to -0.3% for the S&P 500.
The company is also one of only a few REITs that pays a monthly dividend and it currently has an attractive yield of 4.34%.
How much would that monthly dividend have added up to if you invested $1,000 into Realty Income five years ago?
On June 1, 2017, Realty Income shares closed at $53.78. A $1,000 investment could have bought 18.594 shares of the REIT. You would have received your first dividend payment on July 14, 2017, at a rate of $0.2115 per share, for a total payment of $3.93.
Over the next five years, Realty Income’s dividend had a compounded annual growth rate (CAGR) of 3.75%. You would have received $251.38 in dividends for an average annual yield of 4.59%.
However, reinvesting those dividends each month would have resulted in a growing share of equity and an increase in dividend payments over time.
Reinvesting the dividends would have resulted in a total dividend payout of $282.95 over the five years, which would have bought you 5.356 more shares. The average annualized yield would have been 5.11% and the yield on cost during the last 12 months would have been 6.7%.
Going into your sixth year, you would have a 7.1% dividend yield on your original $1,000 investment.
To sum it up, the total annualized return on your $1,000 investment, without reinvesting dividends, would have been 8.51% over five years when factoring in the $252.86 in capital gains.
The total annualized return with the dividend reinvestment would have been 10.04% when factoring in the accumulated shares and capital gains.
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