Realty Income: A Hidden Gem

Several companies expressed their confidence in their future business prospects, by raising their dividends. One of them was Realty Income (O), which engages in the acquisition and ownership of commercial retail real estate properties in the United States. The monthly cash dividend was increased to $0.142375 per share from $0.1420625 per share. This represents the 6th increase for the past year. Tom A. Lewis, Chief Executive Officer of Realty Income, commented, "We are pleased that, despite challenging economic conditions, our operations allow us to once again increase the amount of the dividend we pay to our shareholders. With the payment of the July dividend we will have made 468 consecutive monthly dividend payments."

Realty Income calls itself The Monthly Dividend Company(R), since it has declared 468 consecutive common stock monthly dividends throughout its 40-year operating history and increased the dividend 54 times since Realty Income's listing on the New York Stock Exchange in 1994. The monthly dividend is supported by the cash flow from over 2,300 retail properties owned under long-term lease agreements with leading regional and national retail chains. Check my analysis of Realty Income. This dividend achiever currently yields 7.70%.

Medtronic, Inc. (MDT), which develops, manufactures, and markets medical devices worldwide, approved a 9% increase in its quarterly dividend to 20.50 cents per share. In addition to that the company also approved an increase in its Share Repurchase Plan, authorizing Medtronic to purchase an additional 60 million shares of its common stock, which represents 5.4% of the company’s outstanding stock issued. Medtronic, Inc. is a dividend champion, which has increased its quarterly dividend for thirty one consecutive years. The stock currently yields 2.20%.

John Wiley & Sons, Inc. (JW.A) and (JW.B), which publishes print and electronic products that provide content and solutions, raised its quarterly dividend for A and B shares to 14 cents per share. This action represented an almost 8% increase in comparison to the previous dividend payment. This was the 16th annual dividend increase for this dividend achiever. The stock currently yields 1.50%.

Del Monte Foods Company (DLM), which engages in the production, distribution, and marketing of branded food and pet products for the retail market in the United States, announced that its board of directors has approved a 25% increase in its quarterly dividend to 5 cents per share. This is the first dividend increase for Del Monte Foods Company since it initiated its dividend policy in 2006. The stock currently yields 1.80%.

Annaly Capital Management, Inc. (NLY), which engages in the ownership, management, and financing of a portfolio of investment securities, increased its quarterly dividend by 20% to 60 cents a share. The dividends that Annaly Capital Management, Inc. pays are volatile and have ranged between 10 cents/share in 2005 to 68 cents/share in 2002. The stock currently yields 13.80% based off the past three payments and the new quarterly distribution.

Screening the news for potential additions to my dividend growth portfolio didn’t unveil any new hidden gems except for Realty Income (O), which was on my Best High Yield Dividend Stocks for 2009 list.

Disclosure: Long O

Comments

[Lightway:]

I had my REIT exposure with NLY, but have stopped allocation and having been building a position in O. These are two different markets, but O has a longer track record of increasing dividends as noted in the article.

Retail space is under tremendous pressure right now, so it's a wonder that O is still able to increase dividends in this environment. Hopefully the wisdom of a 40 year track record of managing boom and bust cycles gives them the guidance to maintain their impressive record.

I'm going to run some more diligence on their core holdings and conference calls to see what any of the risks may be in this environment.

Jun 22 05:27 PM

[David Van K...:]

Realty Income is a quintessential dividend growth stock. It pays dividends monthly, and it has increased dividends for 46 consecutive quarters. It has no additional debt coming due until 2013 and no properties under development. Management avoids risk rather than courts it. It signs attractive leases with terms of typically 20+ years. The leases leave the tenants--not Realty Income--responsible for property taxes, insurance, and maintenance. These have helped it achieve average net operating income margins since 2003 of >98% and negligible maintenance capital expenditures. Current leases have an average remaining term of 13 years, and most of them have automatic rent increases tied to inflation. This is a beautifully managed company whose stated goal is "to provide dependable monthly income to shareholders…by acquiring and owning retail real estate that generates dependable lease revenue, which we pass on to shareholders in the form of monthly dividends." How many mission statements read like that?

Jun 23 09:31 AM

[Old Trader:]

O has been a long time position in my core portfolio for all of the reasons mentioned above. I think one of the reasons (aside from their fiscal prudence) for their continued success is they basically deal in stand alone retail properties; no "big box" type retailers in their portfolio. Btw, triple net leases have long been a standard item in CRE.

Jun 23 08:55 PM

[Rhino Realty:]

Agree with Old Trader... will add that O has well balanced portfolio that provides extreme credit, geographic and tenant diversification...also, sr management is strong and the company has plenty of gun powder for yard sales going on around the US.

Jun 23 10:51 PM