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Realty Income (O) is a $50 billion Net Lease REIT that pays a monthly dividend of 26.8 cents which works out to an annual yield of ~5.60%. They call themselves The Monthly Dividend Company since most companies pay dividends quarterly. A Net Lease is one in which the tenant pays rent and many of the operating expenses that a landlord pays under a standard lease.

At the end of 3Q24, O had 15,457 properties representing 336.6 million leasable square feet. Their Annualized Contractual Rent is $4.9 billion. 79% of that comes from retail tenants – many of them low price point – like 7/11 (2.5% of Annualized Contractual Rent), Walgreens (3.3%), CVS (1.2%), Dollar Tree/Family Dollar (3.1%) and Dollar General (3.3%). Other top 20 tenants include Lifetime Fitness, FedEx, Tesco, LA Fitness, AMC Theatres, Walmart/Sam’s Club and Home Depot.

O is geographically diversified including 14.6% of Annualized Contractual Rent coming from Europe – mostly the UK – where they have 483 properties representing 41 million leasable square feet. Within the US, their biggest presence is in Texas where they get 10.3% of their Annualized Contractual Rent.

O has a terrific long term financial track record. Adjusted Funds From Operation (AFFO) – the REIT equivalent of EPS – has grown at a 5% Compound Annual Growth Rate (CAGR) from 1995 through 2023. (O went public on October 18, 1994). When you add the ~6% annual dividend to the ~5% annual increase in CAGR, O has historically given investors a very stable 11% total operational return. I say very stable because O’s Total Shareholder Return Downside Volatility since its October 1994 public listing is 3.6% – the 5th lowest of the 243 S&P companies with trading histories dating back to when O went public.

O is guiding 2024 Same Store Rent Growth to 1% and 2024 AFFO to $4.17-$4.21. At its current price of ~$57.50 share, that’s less than a 14x multiple on 2024 AFFO Guidance. O reports 4Q24 earnings today (Monday February 24) after the market close.

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