We have already added our fifth stock on the growth pie challenge, so it is time now as well for the fifth week of our 2025 “£10-a-week Dividend Challenge“. On this occasion, we’re adding a well known stock on terms of dividends, Realty Income Corporation (O), a highly regarded real estate investment trust (REIT) known for its monthly dividend payments and long-term stability.
Why Realty Income?
Realty Income, often referred to as “The Monthly Dividend Company”, stands out in the REIT sector for its consistent dividend payments and solid financial foundation. The company owns a diverse portfolio of over 12,200 commercial properties leased to tenants in various industries. This diversification helps mitigate risks associated with individual tenant defaults or industry downturns.
As of January 24, 2025, Realty Income’s stock is trading at approximately $53.94, with an annual dividend yield of 5.87%.
Dividend Overview
Our most important metric for this dividend stocks pie is the dividend. Realty Income’s unique selling point is its monthly dividend, which makes it particularly attractive to income-focused investors:
- Current Dividend: Realty Income pays an annualised dividend of $3.17 per share, distributed monthly.
- Yield: At 5.87%, Realty Income offers a compelling income stream compared to many other REITs and other dividend stocks that we have previously reviewed.
- Payout Date: The next ex-dividend date is January 31, 2025, with a payment date scheduled for February 15, 2025. So we are buying shares before the ex-dividend date to ensure eligibility for this month’s payout.
Dividend Growth
Paying dividends is important but we also are looking for companies that are increasing them overtime. On this matter, Realty Income has an impressive track record of dividend growth:
- Since its founding in 1969, the company has paid over 640 consecutive monthly dividends.
- Realty Income has increased its dividend 121 times since its public listing in 1994, demonstrating a strong commitment to shareholder returns.
- Its compound annual growth rate (CAGR) for dividends over the past 10 years is approximately 4.4%.
Dividend Security
And the last point is to review the safety of the dividend on the future. On this case, several factors make Realty Income’s dividend highly secure:
- Triple-Net Lease Model: Tenants cover most property expenses, including maintenance, taxes, and insurance, reducing operational risks for Realty Income.
- High-Quality Tenants: Its tenant base includes financially strong companies in essential sectors like grocery stores, pharmacies, and convenience stores.
- Conservative Payout Ratio: Realty Income maintains a manageable payout ratio, ensuring dividend sustainability even during economic downturns.
- Investment-Grade Credit: With an A3 credit rating from Moody’s, Realty Income is among the most creditworthy REITs, ensuring access to low-cost capital for growth.
Risks and Considerations
While Realty Income is a dependable investment, it’s not without risks as other investments:
- Interest Rate Sensitivity: Rising interest rates can make REITs less attractive compared to fixed-income investments, potentially pressuring stock prices, and we can see how stock price has gone down the hill since interest rates started to be incremented.
- Economic Downturns: Retail-focused properties may experience higher vacancy rates during economic slowdowns, though Realty Income’s diversification helps mitigate this risk.
Why Realty Income Fits the £10-a-Week Challenge
Realty Income’s reliable monthly dividend, long history of growth, and strong financial position make it a perfect addition to our dividend-focused portfolio. Its stability and regular income complement higher-yield but riskier stocks in the “£10-a-week Dividend Pie.” When interest are meant to be lowered on the near term, we see this as a good opportunity for that time.
As always, remember that investing in individual stocks carries risks. Consult a financial advisor to ensure your investment strategy aligns with your goals and risk tolerance. This challenge represents our personal investment journey and is not financial advice.
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