Realty Income notes diversification of tenant base

|About: Realty Income Corporation (O)|By:, SA News Editor

Diversification at The Monthly Income Company (O): The company's 15 largest tenants account for 44.4% of revenue. in 2008 it was 54.3%. No industry accounts for more than 11.2% of revenue (convenience stores are at 11.2%, down 5.1% from a year ago). Can't go wrong with pharmacies - drug stores account for 93.% vs. 5.8% a year ago. Restaurants are now just 9.2% vs. 13.2% a year ago - in 2008, they accounted for 24%.

The largest tenant is FedEx, accounting for 5.1% of revenue, followed by Walgreen and Family Dollar at 5% and 4.9%, respectively.

Q3 investments have an initial cap rate of 7.1% which is 110 basis points higher than O's cost of equity. Over the last 20 years, the spread has averaged 111 basis points.

Yesterday's earnings report and conference call (transcript) was the first since Tom Lewis announced his retirement as CEO, and was led by new CEO John Case. The stock struggled post-earnings, but so did nearly everything income-related as interest rates head back north.