Why I'm Buying O Realty Income: Stock Breakdown and Overview
REITs have been on FIRE the last couple days. In this video I do a comprehensive deep dive into Realty Income to see if it's worth buying. Check it out.
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1:57 REIT History
2:34 Dividend
4:15 Business Model
4:31 Tenants
5:54 Industry Exposure
7:23 Locations
8:02 Lease Agreements
8:25 Growth
10:57 My Portfolio
REITs are structured a little bit differently than other companies available on the stock market and have to operate by a different set of rules. One of those rules is that 90% of the taxable income must be returned to shareholders in the form of dividends.
This means that REITs are literally structured so that investors can receive rental income through the indirect ownership of real estate.
That brings me to the focus of today’s video which is one of the most popular REITs around: Realty Income, ticker symbol “O”.
You should never invest into a company you do not understand so I’ll be doing a comprehensive deep dive into this company to see if it’s worth adding to your investment portfolio.
As of right now, Realty Income is BY FAR the largest triple-net lease real estate company with over 10,000 properties, an occupancy of 98%, and an Enterprise Value of about $50B with the next closest competitor being WP Carey at $19B.
So if you’re watching this video and thinking about adding Realty Income to your portfolio, you’re most likely looking for a fund that adds not only real estate exposure but also pays a quality dividend.
Great news here because the dividend is core to Realty Income. When you go to their website you can actually see in the top left corner icon that their tagline reads: “The Monthly Dividend Company”
Over the last 25 years the economy has definitely tested it. We’ve been through the dot.com bubble of 2000, the financial crisis of 2008, and the pandemic and government shutdowns of 2020. Through all of this, Realty Income has not missed a single dividend.
During all these recessions when a lot of people unfortunately lose their jobs or have to take pay cuts, Realty Income actually gives a pay RAISE to its shareholders EVERY THREE MONTHS.
The Dividend has had a compound annual growth rate of 4.3% which in itself has beat inflation over that time period. Over that same time period, Realty Income has returned 15.1% in total compound annual growth which has beat the S&P 500 by almost 5%.
To quickly summarize, Realty Income purchases single-client, net-leased commercial properties with reliable tenants, located just about everywhere.
The top tenants include Walgreens, Dollar General, Dollar Tree/Family Dollar, FedEx, and 7-Eleven. These types of tenants are service-oriented or offer non-discretionary products at a low price point meaning they are typically products that everybody needs at a price point everyone can afford.
Realty Income’s properties are also strategically located in all 50 states, Puerto Rico, and the UK. The largest concentration being Texas, the UK, and California making up 28%.
A triple-net lease puts the burden of rising property operating expenses onto the tenant, reducing Realty Income’s risk exposure and stabilizing the cash flows.
Another move by management recently aside from acquiring VEREIT was to split off their office space.
In a recent Upwork survey, 17% of remote workers… that’s nearly 1 in 5 people... say they would rather quit than go back to working at the office. And I don’t blame them. Commuting to work, dressing up just to sit in a cubicle and engaging in trivial small talk with people you probably don’t like is a nightmare for a lot of people.
Let me know your thoughts on office space in the comments. Would you rather find a different job than have to go back to working in an office?
PS: I am not a Financial Advisor, any investment commentary are my opinions only. Some of the links in this description are affiliate links that I do receive a commission for. Thanks for the support!
