Realty Income: A Reliable Dividend Stock in Today’s Market
The S&P 500 index (SNPINDEX: ^GSPC) currently offers a yield of 1.3%. In comparison, the average real estate investment trust (REIT) yields 4.1%, while Realty Income (NYSE: O) boasts an attractive 5.8% dividend yield. This high yield underscores Realty Income’s robust business fundamentals.
Dividend Stocks: Beyond Just Yield
High-yield stocks are often easily found through a simple screen for dividend yield. However, focusing solely on this metric can lead to unreliable dividend payers. For instance, AGNC Investment (NASDAQ: AGNC) has a substantial 15% yield but a history of dividend cuts, which may not align with the expectations of most dividend investors.
In addition to yield, considering dividend history is crucial. Realty Income excels in this area, having increased its dividend for 30 consecutive years, including 110 quarters of quarterly increases. With monthly payouts, Realty Income provides a consistent income stream that closely resembles a paycheck for dividend investors.
Furthermore, Realty Income maintains a strong balance sheet with an investment-grade rating. The adjusted funds from operations (FFO) payout ratio stood at a solid 75% in the first quarter of 2025, indicating that the impressive yield is backed by sound financial practices.
Understanding Realty Income’s Operations
Realty Income is specifically structured to deliver stable dividends. Known as “The Monthly Dividend Company,” it operates as a net lease REIT, meaning it owns single-tenant properties where the tenant assumes most property-level operating costs. While single-tenant properties can be high-risk, Realty Income reduces this risk through its extensive portfolio of over 15,600 properties.
Although nearly 75% of its rents come from retail assets—raising concerns amid economic volatility—Realty Income has shown resilience. During the Great Recession, its occupancy rate never dipped below 96%, demonstrating its ability to navigate challenging times while continuing to increase dividends.
Notably, Realty Income has been actively broadening its portfolio. Its size—nearly four times that of its closest competitor—affords it unique access to capital markets, enabling strategic acquisitions in diverse sectors like casinos, data centers, and even European properties. This diversification solidifies Realty Income’s position as a stable investment choice.
Evaluating Realty Income’s Dividend Growth
While Realty Income steadily grows its dividends, some investors might perceive its increases as slow. Its approach typically involves low to mid-single-digit hikes. Nevertheless, the above-average yield mitigates concerns for long-term investors who may be willing to trade rapid growth for reliability. Realty Income serves as a foundational investment, supporting the addition of lower-yield but faster-growing companies to a diversified portfolio.
Is Realty Income a Smart Investment for $1,000?
Before deciding to invest, consider this: the Motley Fool Stock Advisor analyst team recently highlighted their top 10 stocks to buy, and Realty Income did not appear on that list. Investors should weigh this against potential alternatives, as certain stocks identified may offer substantial returns.
For context, consider Netflix, which was included on the list on December 17, 2004. An investment of $1,000 then would have grown to about $642,582 today. Similarly, an investment in Nvidia on April 15, 2005, has ballooned to approximately $829,879.
While the Stock Advisor has an impressive total average return of 975%, significantly outpacing the S&P 500’s 172%, it’s essential to evaluate multiple factors before making a decision. Always consider your investment goals and risk tolerance.
Reuben Gregg Brewer holds positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. Please refer to the Motley Fool disclosure policy for more details.
The views and opinions expressed herein belong to the author and may not reflect those of Nasdaq, Inc.
