Why I Can’t Stop Buying This Phenomenal High-Yield Dividend Stock

I’ve spent the last few years trying to build my passive income streams. I want to eventually get to the point where I don’t have to work to make money. This would give me more peace of mind, knowing that I would be fine if I lost the ability to work or had to take a pay cut.

I am continually diverting part of my income from work into investments that generate passive income. One passive income producer I can’t get enough of these days is Real estate income (NYSE:O). The real estate investment fund (REIT) does a phenomenal job paying dividends.

A financial fortress

Realty Income recently declared its 649th monthly dividend of $0.263 per share or $3.156 annualized. With the stock price currently around $57.50 per share, the REIT yields about 5.5%. This is several times greater than the S&P 500is 1.3% dividend yield.

This high-yield dividend rests on an extraordinarily solid foundation. The REIT generates very stable cash flow because it focuses on owning durable real estate. It has a diverse portfolio of approximately 15,500 properties leased to more than 1,500 tenants across 89 industries in the U.S. and parts of Europe. About 90% of its rent comes from real estate net leased for tenants resilient to economic downturns or e-commerce pressures, such as essential retailers, warehouses, industrial facilities and gaming properties.

This durability has been demonstrated over the years. The REIT has delivered positive earnings growth in 27 of the last 28 years.

Meanwhile, Realty Income has a fairly conservative financial profile. Its dividend payout ratio was less than 75% in the first quarter, which is lower than many REITs. Realty Income also has one of the strongest balance sheets in the REIT sector. It is one of only eight in the S&P 500, with two bond ratings of A3/A- or better. These features provide tremendous financial flexibility.

Unstoppable growth

Realty Income’s durable portfolio and conservative financial profile have allowed it to constantly grow your portfolio and dividends. Last month, the REIT delivered its 126th dividend increase since its public market listing in 1994, and its 107th consecutive quarterly increase. The company has increased its payout at a compound annual rate of 4.3% over the past three decades.

The REIT should have no problem continuing to increase its payout in the future. The company predicts that internal growth drivers – particularly rising rents and acquisitions financed with cash flow retained after dividend payments – are expected to increase its adjusted value. funds from operations (FFO) at 2% per share annually. That provides a good basis for dividend growth.

The story continues

Realty Income also expects to continue to make externally financed acquisitions. The REIT estimates that each billion dollars of business financed by selling shares and issuing new debt will yield about 0.5% in adjusted incremental FFO growth per share each year. It conservatively calculates that it can make enough new externally financed investments to provide adjusted annual growth of 4% to 5% in FFO per share, around its historical average.

It might have Do not miss of investment opportunities. The company estimates the total addressable market for net real estate leasing is $5.4 billion in the US and $8.5 billion in Europe. Typically raises over $50 billion in new investment opportunities every year. Selectively closes those that should produce the best risk-adjusted returns; it closed just 16% of the $59 billion in deals it did last year. The company has been steadily expanding its opportunity set, adding new property types (gaming facilities and data centers), geographies (additional European countries) and investment structures (preferencial acts) to your portfolio, increasing your ability to continue growing.

A passive income machine

Realty Income is a passive income investment model for me. The REIT’s high-yield dividend is at an extremely sustainable basis. He did a phenomenal job increasing that payout, which seems almost right continue for many years come over. It should provide me with an ever-increasing income stream. This should help me reach my goal of financial freedom through passive income much faster. That’s why I can’t stop buying stocks whenever I have more money avavailable to invest.

Should you invest $1,000 in real estate income now?

Before buying Realty Income stock, consider the following:

O Motley Fool Stock Advisor the team of analysts has just identified what they believe to be the 10 best stocks for investors to buy now… and Realty Income was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia I made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $751,180!*

Stock advisor provides investors with an easy-to-follow plan for success, including guidance on building a portfolio, regular analyst updates, and two new stock picks each month. O Stock advisor service has more than quadrupled the return of the S&P 500 since 2002*.

See the 10 actions »

*Stock Advisor returns July 22, 2024

Matt DiLallo has positions in Realty Income. The Motley Fool has positions and recommends Realty Income. The motley fool has a disclosure policy.

Why I Can’t Stop Buying This Phenomenal High-Yield Dividend Stock was originally published by The Motley Fool