If you’re an investor who likes to keep stocks for the long haul, you’ll need to follow a different playbook. Merely selecting the stocks with the highest yields, like those in the S&P 500, isn’t enough. You need to aim for solid, high-yield dividend stocks that you can rely on, ideally buying them when they’re undervalued. Right now, there’s an opportunity with a real estate company that’s still priced about 25% below its pre-pandemic levels.
Why Consider This Real Estate Powerhouse?
Realty Income, with the stock symbol O, is a massive, globally diversified real estate investment trust (REIT). It uses a net lease model, which means that its tenants handle most of the property’s operational costs. Such arrangements are often like financing deals for tenants, where they sell their property to gain cash while retaining control via lease terms. Realty Income, benefiting from good access to capital markets, profits from the gap between its capital costs and the rental income it collects.
This setup is quite beneficial for both Realty Income and the property seller, who becomes a tenant. The REIT structure allows income to pass to shareholders in a tax-efficient way as it avoids corporate-level taxes. Realty Income currently offers a tempting 5.5% dividend yield, which outshines the S&P 500’s modest 1.2% and even bests the average REIT yield of 3.6%.
But don’t let the impressive yield be the only factor swaying you. Realty Income boasts a stellar track record of annual dividend hikes over the last 30 years, growing at an average rate of 4.4% yearly. Within those decades is an ongoing streak of 110 quarterly increases. Plus, with dividends paid monthly, this REIT can feel like receiving regular paychecks.
What’s Behind Realty Income’s Success?
Among various net lease REITs, Realty Income stands out in several ways. Firstly, its sheer size is notable, with a market valuation of about $50 billion. Its nearest competitor only boasts $14 billion. This scale gives Realty Income an edge in accessing capital, drawing more attention when it issues stocks and bonds, further aided by its investment-grade balance sheet. This REIT’s vast portfolio of 15,600 buildings adds significant diversification.
But Realty Income’s diversity doesn’t stop with numbers; its investments span different sectors, including retail, industrial, and unique areas like casinos and vineyards. The company’s reach extends beyond North America into European territories, providing multiple avenues for growth, largely fueled by acquisitions.
While being large has its perks, it also poses a challenge for Realty Income. To impact its financials, it requires substantial transaction volumes. In 2024, for instance, it acquired nearly $4 billion in properties and plans a similar level of investment for 2025. The company’s adjusted funds from operations (FFO) grew at a moderate rate in 2024 and are expected to continue similarly in 2025. Ongoing growth in the low to mid-single digits is a realistic expectation.
A Steady Approach to Long-Term Gains
Accumulating wealth is more like running a marathon than a sprint. Realty Income’s appealing yield, robust business model, and steady growth make it an attractive prospect. It can provide a solid base for your long-term portfolio, giving you the freedom to include faster-growing but lower-yielding companies. This substantial net lease REIT might not deliver fast thrills, but its real value lies in its reliability. This S&P 500 stock will keep you comfortably on course with its dependable, if slow, dividend growth, ensuring peace of mind as you rest.
