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Written by Zacks Equity Research
Realty Income Corporation O has announced an increase in its common stock monthly cash dividend to 26.30 cents per share from 26.25 cents paid out earlier. This marked its 126th dividend hike since its listing on the NYSE in 1994 and the fourth increase in 2024.
The increased amount will be paid out on Jul 15 to shareholders on record as of Jul 1, 2024. The latest dividend rate marks an annualized amount of $3.156 per share compared with the prior rate of $3.150. Based on the company’s share price of $52.24 on Jun 11, the latest hike results in a dividend yield of 6.04%.
Though the latest hike marks a marginal increase from the prior dividend, the latest dividend announced will be the company’s 648th consecutive monthly dividend payout in its 55-year operating history.
Solid dividend payouts are the biggest enticements for real estate investment trust (REIT) investors, and Realty Income is committed to boosting its shareholder wealth. This retail REIT holds the trademark of the phrase “The Monthly Dividend Company.” It has made 107 consecutive quarterly dividend hikes. This retail REIT has witnessed compound average annual dividend growth of 4.3% since its listing on the NYSE.
Moreover, Realty Income has increased its dividend 23 times in the last five years and has a five-year annualized dividend growth rate of 2.99%. Check Realty Income’s dividend history here.
The latest hike reflects O’s ability to generate decent cash flow through its operating platform and high-quality portfolio. The majority of its annualized retail contractual rental revenues are generated by clients who have a service, non-discretionary and/or low-price-point component to their business. Such businesses are less likely to be affected by economic downturns and competition from online sales. These provide more reliable streams of income, which boost the stability of rental revenues and generate predictable cash flows.
Moreover, Realty Income’s diversified tenant base and accretive buyouts bode well for its long-term growth. The solid property acquisitions volume at decent investment spreads has aided the company’s performance so far. In January 2024, Realty Income completed its all-stock merger transaction with Spirit Realty Capital, Inc. The transaction is immediately accretive on a leverage-neutral basis and adds to Realty Income's size, scale and diversification, enabling it to expand its scope for future growth.
Recently, Realty Income has announced an increase in its 2024 earnings and investment guidance. The retail REIT projects its 2024 adjusted funds from operations (AFFO) in the range of $4.15-$4.21 per share compared with the prior guidance of $4.13-$4.21. Realty Income also expects its 2024 investment volume to reach $3 billion, up from $2 billion guided earlier. Per management, these raises reflect the company’s confidence in its business outlook as it nears the midpoint of the year.
Specifically, management noted that these increases stem from an improving investment environment, mainly in Europe. Also, management pointed out the company’s stable operating performance in its high-quality, diversified global real estate portfolio.
Realty Income maintains a healthy balance sheet position and exited the first quarter of 2024 with $4 billion of liquidity. The company ended the quarter with modest leverage and strong coverage metrics with net debt to annualized pro forma adjusted EBITDAre of 5.5X and a fixed charge coverage of 4.5X. O also enjoys a credit rating of A- (Stable) and A3 (Stable) from Standard & Poor’s and Moody’s, respectively, which provides access to the debt market at favorable costs.
With ample financial flexibility, the company remains well-poised to respond to any challenges and bank on growth opportunities.
Moreover, with a healthy financial position and a lower debt-to-equity ratio compared with the industry, we expect the latest dividend rate to be sustainable.
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Other REITs Announcing Dividend Hike
Apart from Realty Income, Alexandria Real Estate Equities, Inc. ARE and Welltower Inc. WELL announced increases in dividends in recent times.
Alexandria announced a 2.4% sequential hike in its second-quarter 2024 cash dividend payment. Delighting its shareholders, the company will now pay out a dividend of $1.30 per share, up from $1.27 in the prior quarter. The increased dividend will be paid out on Jul 15 to shareholders on record as of Jun 28, 2024. ARE currently has a Zacks Rank #3.
Welltower’s board of directors approved a 10% increase in the quarterly dividend to 67 cents per share, beginning with the second quarter of 2024, up from 61 cents paid earlier. Welltower currently has a Zacks Rank #3.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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