Realty Income Corp's Dividend Analysis
Assessing the Sustainability of Realty Income Corp's Dividend
Realty Income Corp(NYSE:O) recently announced a dividend of $0.26 per share, payable on 2024-03-15, with the ex-dividend date set for 2024-02-29. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Realty Income Corp's dividend performance and assess its sustainability.
What Does Realty Income Corp Do?
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Realty Income owns roughly 13,300 properties, most of which are freestanding, single-tenant, triple-net-leased retail properties. Its properties are located in 49 states and Puerto Rico and are leased to 250 tenants from 47 industries. Recent acquisitions have added industrial, gaming, office, manufacturing, and distribution properties, which make up roughly 17% of revenue.
A Glimpse at Realty Income Corp's Dividend History
Realty Income Corp has maintained a consistent dividend payment record since 1994. Dividends are currently distributed on a monthly basis. Realty Income Corp has increased its dividend each year since 1999. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 25 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Realty Income Corp's Dividend Yield and Growth
As of today, Realty Income Corp currently has a 12-month trailing dividend yield of 5.86% and a 12-month forward dividend yield of 5.89%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Realty Income Corp's annual dividend growth rate was 3.00%. Extended to a five-year horizon, this rate stayed the same. And over the past decade, Realty Income Corp's annual dividends per share growth rate stands at 3.70%.
Based on Realty Income Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Realty Income Corp stock as of today is approximately 6.79%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Realty Income Corp's dividend payout ratio is 224%. This may suggest that the company's dividend may not be sustainable.
Realty Income Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Realty Income Corp's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Realty Income Corp's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Realty Income Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Realty Income Corp's revenue has increased by approximately 7.30% per year on average, a rate that outperforms approximately 71.8% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Realty Income Corp's earnings increased by approximately 0.20% per year on average, a rate that outperforms approximately 43.31% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 0.90%, which outperforms approximately 47.7% of global competitors.
Concluding Thoughts on Realty Income Corp's Dividend Prospects
Considering Realty Income Corp's consistent dividend history, its status as a dividend aristocrat, and its promising yield on cost, the company stands out as a potentially attractive option for dividend-seeking investors. However, the high payout ratio raises concerns about the sustainability of these dividends, despite the company's strong profitability and growth metrics. Investors should weigh these factors carefully, keeping an eye on future earnings reports and management commentary for indications of the company's long-term dividend strategy. For those looking to expand their portfolio with high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener to discover other investment opportunities.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
