Realty Income Looks Impaired

Jan. 17, 2021 1:00 PM ETRealty Income Corporation (O)137 Comments


  • O has been vastly underperforming its peer group.
  • The market has revalued the stock much lower than pre-COVID.
  • But this is not a buying opportunity.

Image source

Certain types of REITs have been decimated in this crisis, while others have held up fairly well. One area that has been sort of in the middle is retail REITs, although it does depend heavily on what type of retail. Malls are a disaster to a large extent and I wouldn’t go near them. Dividend legend Realty Income (NYSE:O) is making the best of its situation with its off-mall retail properties and high levels of diversification. However, that’s not good enough to make the stock a buy.

We can see the stock has been in a fairly narrow channel since the summer of last year, and given where the valuation is today, I don’t see a catalyst to the upside or downside that should change that anytime soon. If you’re just in it for the dividend, that might suit you just fine, and if it does, you can continue to collect your dividends.

I’m at the stage where I need capital appreciation potential and I just don’t see it here despite the fact that the stock is nowhere near its pre-COVID pricing. The bottom panel shows also that Realty has been pounded against its peer group in the past three months or so, ceding around 30% in a bout of enormous relative underperformance. As I said, I don’t see any reason for Realty to go higher, so unless the group suddenly weakens, you’re better off somewhere else for price appreciation.

No upside catalysts

Realty is probably the most famous retail REIT in the market because of its exemplary dividend history. That reputation has been well-earned, and the company deserves its due there.

Source: Investor presentation

It has size, scale, diversification, a smart management team, and a massive streak of paying increasing dividends to shareholders. However, the bottom line is that it is still a

This article was written by

Josh Arnold profile picture
Leader of Timely Trader
Maximize your gains through live trading with alerts ahead of market trends

I've been covering financial markets for ten years, using a combination of technical and fundamental analysis to identify potential winners (and losers) early, particularly when it comes to growth stocks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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