O

Realty Income Corporation

63.07
USD
1.24%
63.07
USD
1.24%
55.50 76.06
52 weeks
52 weeks

Mkt Cap 24.56B

Shares Out 389.39M

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Realty Income Represents Value In A Fearful Market

Summary Realty Income's share price has dropped substantially recently, putting negative pressure on its returns and driving up its yield. The company can handle a weak inflationary environment while working to continue its growth. Realty Income's diversified asset portfolio is incredibly reliable with a low-risk of recession losses and a high chance of continued returns. Overall, we recommend taking advantage of Realty Income's depressed share price to invest at an almost 5% yield. Looking for higher risk/reward options trading ideas? I offer this and much more at my exclusive investing ideas service, The Retirement Forum. Learn More » Realty Income Corporation (NYSE:O) is one of the largest real-estate investment trusts, with an almost $40 billion market capitalization, that has seen its market cap drop almost 25% lately. That weakness means despite rising interest rates and the market volatility, the company has become a valuable investment, one that has the ability to drive substantial shareholder returns. Realty Income Positioning Realty Income is incredibly well-positioned in its market. Realty Income has an almost $60 billion enterprise value, with a market capitalization of almost $40 billion. The annualized base rent for the company is roughly $3 billion, with an A3/A- credit rating. The company has more than 50 years of operating history showing its strength and it has continued to grow rapidly across the last several years. The company has several unique strengths. It has an incredibly diversified client base with more than 1 thousand clients and more than 10 thousand properties. The company views 94% of its rent as resilient to macroeconomic effects and 43% of its rent from investment grade clients. The company has an incredibly strong track record. The company has the ability to continuing growing its income, something it has a strong history of doing. Realty Income has a strong history of growth which will help support additional shareholder returns. The company has 5.1% historical AFFO/SH growth and historical dividend yield growth on top of its almost 5% dividend yield. The company has had massive consistent growth here with only one negative year (2009), and we see no reason why that trend wouldn't continue. It's important to not only pay attention to the company's historic growth rate but also the reliability of its growth rate. This, in our view, implies whether the company can continue its growth. Realty Income Balance Sheet Realty Income has an incredibly strong balance sheet that it'll be able to continue utilizing to drive shareholder returns. The company does have a substantial long-term debt load. However, it has a very strong balance sheet. The company's 5.2x net debt ratio is very manageable and the company has 93% debt with a 7.6 year weighted average term to maturity. The company can comfortably cover its debt obligations for the next several years. There is some interest rate risk to the company here, where rising interest rates could hurt its ability to refinance its interest. Despite that, the company's balance sheet remains reliable, at least for the next several years. Realty Income Reliability Realty Income's portfolio also helps to support its overall reliability, which will support shareholder returns. Reality Income's reliability comes from its diversified asset base. The largest state to the company is Texas, making up just over 10% of its properties. The company is one of the few U.S.-based real estate investment trusts ("REITs") with substantial UK-based diversification as it moves its business model there. There, the company's rent already makes up almost 10% of its portfolio. The company is diversified across numerous industries and businesses, and many such as Walmart (WMT), Seven & i (OTCPK:SVNDY), and Dollar General (DG) are very recession-resistant. Grocery stores and dollar stores are other recession resistant businesses. The company suffered from lockdowns at the start of COVID-19, but we view its current portfolio as being more resistant. Realty Income Shareholder Return Potential At the end of the day, Realty Income's shareholder return potential is based on its unique and diversified portfolio of assets, historic growth, and strong dividend yield. The company has a dividend yield of almost 5%, a dividend yield that it pays monthly and one that has a strong potential to continue for the long run. Second, the company has a diversified and reliable asset base. That means even in a potential recession we expect the company's cash flow to be able to remain strong. On top of these two factors, the company has continued substantial growth potential. It's expanding into Europe making it one of the few REITs to be doing so, while also taking advantage of opportunities elsewhere. We expect the company to be able to maintain its strong financial position and continue its consistent growth. Thesis Risk The largest risk to our thesis here is a recession. Many might think it's inflation, but in general, minus short-term volatility from a harder time selling, property prices tend to appreciate with inflation. A recession, however, could potentially cause some of the company's customers to go bankrupt hurting its potential future income and returns. Conclusion Realty Income has had substantial share price weakness recently, presenting the company as a unique investment opportunity. The company currently has an almost 5% dividend yield, a dividend yield that it can comfortable afford with its impressive portfolio of assets. The company can continue covering its financial expects. Going forward, we expect the company to continue growing its dividend. We expect the company to opportunistically grow its portfolio of assets, especially in Europe where the UK already makes up almost 10% of the company's revenue. All of this makes the company a valuable investment, let us know your thoughts in the comments below. The Retirement Forum provides actionable ideals, a high-yield safe retirement portfolio, and macroeconomic outlooks, all to help you maximize your capital and your income. We search the entire market to help you maximize returns. Recommendations from a top 0.2% TipRanks author! Retirement is complicated and you only get once chance to do it right. Don't miss out because you didn't know what was out there. We provide: Model portfolios to generate high retirement cash flow. Deep-dive actionable research. Recommendation spreadsheets and option strategies. Click for our discounted 2-week free trial! This article was written by The Value Portfolio focuses on deep analysis of a variety of companies with a primary focus on the energy sector. Occasional articles also focus on building a retirement portfolio or on other sectors (such as healthcare or technology). Legal Disclaimer (please read before subscribing to any services): Any related contributions to Seeking Alpha, or elsewhere on the web, are to be construed as personal opinion only and do NOT constitute investment advice. An investor should always conduct personal due diligence before initiating a position. Provided articles and comments should NEVER be construed as official business recommendations. In efforts to keep full transparency, related positions will be disclosed at the end of each article to the maximum extent practicable. The majority of trades are reported live on Twitter, but this cannot be guaranteed due to technical constraints. My premium service is a research and opinion subscription. No personalized investment advice will ever be given. I am not registered as an investment adviser, nor do I have any plans to pursue this path. No statements should be construed as anything but opinion, and the liability of all investment decisions reside with the individual. Investors should always do their own due diligence and fact check all research prior to making any investment decisions. Any direct engagements with readers should always be viewed as hypothetical examples or simple exchanges of opinion as nothing is ever classified as “advice” in any sense of the word. Disclosure: I/we have a beneficial long position in the shares of O either through stock ownership, options, or other derivatives. 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. Comments (2)

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