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Linked here is a detailed quantitative analysis of Realty Income Corp. (O). Below are some highlights from the above-linked analysis:

Company Description: Realty Income Corporation is an equity real estate investment trust that owns, develops, and manages retail real estate, primarily single-tenant buildings throughout most of the U.S. The trust is also among a handful of REITS that pay monthly dividends.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

O is trading at a discount to 1.) and 3.) above. When also considering the NPV MMA Differential, the stock is trading at a 12.9% discount to its calculated fair value of $62.13. O earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section, there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

O earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45% O earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1994 and has increased its dividend payments for 29 consecutive years.
1. NPV MMA Diff.
2. Years to > MMA

O earned a Star in this section for its NPV MMA Diff. of $1,245 This amount is in excess of the $600 target I look for in a stock that has increased dividends as long as O has. The stock's current yield of 5.65% exceeds the 3.75% estimated 20-year average MMA rate.
Peers: The company's peer group includes: The American Tower Corporation (AMT) with a 3.5% yield, National Retail Properties, Inc. (NNN) with a 5.9% yield, and The Macerich Company (MAC) with a 5.7% yield.
Conclusion: O earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section, and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks O as a 4-Star Strong stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $68.88 before O's NPV MMA Differential decreased to the $600 minimum that I look for in a stock with 29 years of consecutive dividend increases. At that price, the stock would yield 4.4%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $600 NPV MMA Differential, the calculated rate is 0.1%. This dividend growth rate is lower than the 2.8% used in this analysis, thus providing a margin of safety. O has a risk rating of 1.75 which classifies it as a medium-risk stock.
O follows a conservative strategy which has led to it being one of the best-positioned REITs with a capacity to make additional acquisitions. Its tenants sign long-term leases with regular rent bumps that allow O to provide a reliable, slow-growing, monthly dividend. The company is well-managed and has delivered consistent growth over time.
The company's debt to total capital of 39% (down from 44%) is below my 45% maximum. Its free cash flow payout of 74% (up from 90%) is above my maximum of 60%. The stock is currently trading at a 12.9% discount to my calculated fair value of $62.13. For now, I will continue to add to my position as my allocation allows.

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