Dividend stocks aren’t usually the most exciting stocks on the market. They’re usually older, well-established stocks that have a lot of cash and aren’t growing all that fast. However, the value they provide in their stability and reliability, as well as their passive income, make them an indispensable part of a retirement plan.
Realty Income (NYSE: O) is one of the best dividend stocks you can buy. Here’s why this understated stock is well-loved by dividend investors and could add incredible value to a retirement portfolio.
Any dividend stock starts with an excellent company that has a reliable means of increasing cash and funding the dividend. Realty Income is a real estate investment trust (REIT), a business structure where companies pay 90% of their earnings as dividends.
This top REIT offers everything you could want in a dividend stock.
Dividend stocks aren’t usually the most exciting stocks on the market. They’re usually older, well-established stocks that have a lot of cash and aren’t growing all that fast. However, the value they provide in their stability and reliability, as well as their passive income, make them an indispensable part of a retirement plan.
Realty Income (O 0.41%) is one of the best dividend stocks you can buy. Here’s why this understated stock is well-loved by dividend investors and could add incredible value to a retirement portfolio.
It starts with the model
Any dividend stock starts with an excellent company that has a reliable means of increasing cash and funding the dividend. Realty Income is a real estate investment trust (REIT), a business structure where companies pay 90% of their earnings as dividends.
Not all REITs are the same, though. They typically own and lease properties, and they tend to specialize in different industries. Realty Income is a retail-focused REIT, leasing its properties to large essentials chains such as Walmart and Lowe’s. About 21% of its leases are to grocery chains and convenience stores, and its top three clients are 7-Eleven, Dollar General, and Walgreens. These are the kinds of “boring” companies that have reliable revenue sources and are very low risk.
Image source: Getty Images.
However, the REIT has expanded in several ways that diversify its holdings. It has tenants in industrials and gaming, and it has a large presence in Europe. In fact, Asda and Sainsbury’s are among its top 20 tenants, and U.K. properties make up 14.3% of the total.
Realty Income grows through purchasing more properties and acquiring other REITs. It has more than 15,000 properties today, and it sees a $14 trillion addressable market in new properties. That includes 91% in what it calls “necessity retail,” as well as some of its newer industries, including data centers. It sourced $121 billion in volume last year and invested $6.2 billion, a 5% selectivity rate, and it has adequate and flexible funding.
Realty Income
Today’s Change
(-0.41%) $-0.26
Current Price
$63.02
And finishes with the dividend
That’s a prelude to how it funds its top dividend. Realty Income has all the features most passive income investors want in a dividend — the dividend is growing and reliable, and it yields 5% at the current price.
An added perk is that it pays the dividend monthly. In fact, it has paid the dividend every month without fail for the past 669 months, or more than 55 years. That’s about as reliable as it gets. It has also raised it for the past 114 quarters.
It may not get much hype, but Realty Income could quietly fund your retirement for decades.
