Delighting its shareholders, Realty Income Corporation O recently announced its 101st common stock monthly dividend hike since the company’s NYSE listing in 1994. The company will now pay 22.60 cents per share compared with the 22.55 cents paid earlier.
The increased dividend will be paid on Apr 15 to shareholders on record as of Apr 1, 2019. The latest dividend rate marks an annualized amount of $2.712 per share versus the prior rate of $2.706 per share. Based on the company’s share price of $71.36 on Mar 12, it results in a dividend yield of around 3.8%.
Notably, solid dividend payouts are the biggest enticement for REIT investors and Realty Income remains committed to boosting shareholders’ wealth. The company enjoys a trademark of the phrase “The Monthly Dividend Company”.
Although the latest hike came by a marginal figure, it marks the company’s 585 consecutive monthly dividend payments throughout its 50-year operating history. Moreover, the company has made 86 consecutive quarterly dividend hikes, which is encouraging. In fact, the retail REIT has witnessed compound average annual dividend growth of around 4.6% since its listing on the NYSE.
The latest hike reflects Realty Income’s ability to generate solid cash flow growth through its operating platform and high quality portfolio. With a current cash flow growth rate of 3.39%, ahead of the industry’s average of 2.82%, the increased dividend is likely to be sustainable.
It’s no secret that in recent years, the retail REIT industry has been plagued with issues like shift of consumers toward online channels, dwindling mall traffic, store closures and bankruptcy of retailers. Retail REITs like Taubman Centers, Inc. TCO, Macerich Company MAC, Pennsylvania Real Estate Investment Trust PEI and several others have been weighed down this.
However, amid these, Realty Income is trying to differentiate itself by deriving more than 90% of the company’s annualized retail rental revenues from tenants with a service, non-discretionary, and/or low price point component to their business. Such businesses are less susceptible to economic recessions, as well as competition from Internet retailing.
The company’s accretive acquisitions and solid balance-sheet strength augur well for long-term growth. Prudent underwriting at acquisitions has helped maintain high occupancy levels consistently. Additionally, its same-store rent growth underlines limited operational volatility.
Nonetheless, the company’s exposure to single-tenant assets raises risks associated with tenant default. Also, despite Realty Income’s efforts to diversify the tenant base, its tenants in the convenience stores and drug stores industry accounted for around 11.2% and 10.2% of the company’s rental revenues for the year ended Dec 31, 2018.
Currently, Realty Income has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Realty Income Corporation (O) : Free Stock Analysis Report
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