One Of My All-Time Favorite Monthly Dividend Payers…
Over at my premium newsletter, High-Yield Investing, I have a portfolio reserved for a group of stocks I call “Lifetime Wealth Generators.”
Membership is reserved for special companies that can be reliably expected to continue growing dividends well into the next decade, regardless of what the economy throws at them.
Among other requirements, these businesses should have sturdy and visible cash flows that aren’t terribly sensitive to external macro events. They should also have identifiable competitive advantages and operate in industries that are built to stand the test of time.
As you can imagine, there aren’t many income stocks that meet this strict criteria.
But Realty Income (NYSE: O) is a textbook example. Even better, it pays monthly dividends…
The Monthly Dividend Company
Realty Income is a real estate investment trust (REIT) that was built for a single purpose: to throw off a rising stream of tax-advantaged rental income.
For those who are unaware, REITs are exempt from federal income taxes, provided they distribute at least 90% of their taxable income to stockholders.
Realty Income began in 1992 with 600 scattered properties. A decade later, the portfolio had doubled in size to 1,200 properties. And today, this coast-to-coast empire spans more than 11,000 properties. Most of the firm’s portfolio is invested in freestanding retail properties located in prime, high-traffic spots. And they are leased to reliable tenants that dutifully pay their rent on time each month — like Wal-Mart, Home Depot, Taco Bell, Circle K, and Walgreens.
When Realty Income debuted on the New York Stock Exchange in 1994, the company was generating about $40 million in funds from operations (FFO) annually. Now, it’s churning out that much every few weeks.
This retail landlord has literally trademarked its motto: The Monthly Dividend Company. And for good reason. It has made 619 consecutive monthly distributions, a streak that dates back more than 50 years. And get this… Even during the Covid-19 pandemic, occupancy rates never once dipped below 96%. And as the portfolio has grown, so too have distributions – increasing for 97 consecutive quarters.
Right now, investors are getting $2.96 per year — which puts the yield at close to 4.5%. On average, distributions have been climbing about 5% annually over the past two decades.
Part of that stability comes from the deep tenant base. Realty Income’s renters represent 60 diverse industries ranging from apparel to grocery stores, most of which are resistant to e-commerce threats.
Second, the properties are typically rented under triple-net leases, in which the tenants (not the landlord) are responsible for property taxes, insurance and maintenance expenses. That helps minimize the impact of rising upkeep costs and leads to superior margins. Better still, most leases have built-in clauses that stipulate automatic 1% to 2% annual rent hikes.
Finally, most of the company’s renters sign long-term leases that range from 10 to 25 years. Compare that with other real estate owners: Hoteliers rent their rooms by the night; storage facilities lease space one month at a time; and apartment complexes usually lock up renters for 12 months.
Action to Take
If you want an idea of the stock’s long-term wealth-creating power, just look at what it has already done over the past two decades.
An investor who bought Realty Income in 2002 would now be receiving a yield-on-cost of 20% on their initial investment. Said another way, the $38-plus in dividends received in this time period would have paid for the original position twice over.
This is why Realty Income remains one of my favorite income-producing stocks.
My High-Yield Investing subscribers and I have held Realty Income in our portfolio for years. In that time, we’ve earned more than 50% in dividends alone. And with a track record like this, I think we’ll see plenty more dividend increases and share price gains in the future.
Realty Income is just one of my favorite monthly dividend payers. But most investors don’t realize there are dozens of other monthly payers out there…
I make it my business to research the best income payers the market has to offer. And Realty Income is just one of the names you could be using to start receiving thousands in payouts every single month.
In my latest report, I reveal 12 of my favorite monthly dividend payers that you should consider owning. Go here to learn more now…