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Realty Income: A Diversified REIT With A Sound Dividend Track Record

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The Dividend Guy


  • One of the only 9 U.S. REITs with at least one “A” credit rating.
  • A highly diversified REIT in terms of tenants, industries, geographies and property types.
  • 24-year track record of regularly increasing the dividend.

Investment Thesis

Realty Income Corporation is the largest net lease real estate investment trust (REIT) in the U.S. The REIT is highly diversified and enjoys a regular stream of cash flows from investment grade tenants. Realty Income deserves to stay in a dividend income investor's portfolio not only because it has paid dividends for almost five decades, but also because it has a steady cash flow stream from diversified properties and quality tenants, maintaining high occupancy levels consistently, which never dropped below 96%.

Understanding The Business

Founded in 1969, Realty Income Corporation (NYSE:O) is a real estate investment trust (REIT) that engages in the asset management of commercial properties in the U.S. It earns regular revenue in the form of rental income from properties in diverse locations and quality tenants.

Realty Income's property portfolio can be broadly classified into retail (80% of revenue), industrial (13%), office (5%) and agriculture (2%). The company's portfolio consists of more than 5,000 properties across 49 states. Realty Income today has around 251 commercial tenants from over 47 different industries.

Source: Realty Income Investor Presentation


Source: Ycharts

The REIT owns and purchases freestanding, single-tenant properties in key locations. Location is the key to the success of a REIT business and Realty Income's properties in key markets and strategic locations is one of the main reasons for its strong revenue growth. The properties have a high occupancy ratio of more than 98%, which indicates the success of its portfolio strategy.

In addition, Realty Income typically enters into triple net leases (where tenants pay maintenance, taxes, and insurance costs) with an initial lease term of 15 years with provision for annual escalations. The REIT also has a sound track record of lease rollovers. It re-leased 181 properties with expiring leases (by the end of Q3'17), out of which 164 were to the same tenant (89%).

This article was written by

The Dividend Guy profile picture
My name is Mike and I’m the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager here at Dividend Stocks Rock (DSR). I earned my bachelor degree in finance-marketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I’m also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family. I started my career in the financial industry back in 2003. I earned several promotions along with a good pile of diplomas. I had lots of fun working with clients in private banking for half a decade, but thought I could do more with my life. In 2016, I decided to take a leap of faith and left everything behind to travel across North America and Central America with my family. We drove through nine countries and stayed three months in Costa Rica before returning home. This was an eye-opening adventure that led me in 2017 to quit my job in the financial industry and pursue my dream; helping others with their personal finance through my investing websites. You just found the reason why I quit my suit & tie job!

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