Checking In On One Of My All-Time Favorite Income Picks…

It’s been a while since I’ve updated our free readers about one of my all-time favorite dividend payers.

It’s no coincidence that it happens to be a REIT (real estate investment trust).

REITs offer a great way for investors of any means to participate in real estate with a simple click of the mouse at their brokerage.

The primary appeal of these securities is their income-producing potential. Real estate trusts are exempt from federal income taxes, provided they distribute at least 90% of their taxable income to stockholders. That special perk helps explain why the average REIT offers an annual dividend yield of about 4%, more than double the market norm.

These publicly traded vehicles come in many different flavors: apartment REITs, office REITs, industrial warehouse REITs, retail REITs, storage REITs, and healthcare REITs. Some even own cell phone towers or highway billboards – any asset that generates rental income.

But one of my favorites is a simple brick-and-mortar retail REIT.

I’m talking about Realty Income (NYSE: O).

Back in September last year, I recapped what makes this REIT so special.

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 Walgreens, Home Depot, Starbucks, and 7-Eleven. (It also helps that these are mature businesses largely insulated from competitive e-commerce threats.)

And then later, in September 2022, I wrote about how retail REITs like Realty Income were beginning to venture into casinos — another one of my favorite businesses.

But as I’ll explain in a moment, investors just keep getting more and more reasons to love Realty Income…

What’s Up With Realty Income Lately?

Over the last 12 months, Realty Income has plowed billions into new acquisitions to expand its empire. ($6 billion, to be exact.) We’ve chronicled some of this shopping spree over at my premium service, High-Yield Investing. Most notably, the company’s first leap across the pond in Europe.

At last check, Realty Income’s portfolio stood at 11,733 properties — 11,602 of which (99%) are occupied and earning rent.

The tenant base spans 79 industries and is heavily weighted to some of the safer brick-and-mortar retail harbors. You know, grocery chains, discount retailers, pharmacies, gas stations, and fast-food. Like I said earlier, this client roster faces minimal e-commerce threats, which explains why vacancies are few and far between. A little more than 500 leases expired last year. And 420 were almost immediately re-leased to the existing tenant.

Incidentally, the annual rent on these re-leases is $100 million, versus $94 million previously – a healthy rent recapture rate of 106.7%.

That latter metric speaks to strong demand in a tepid retail environment. But that’s nothing new for a business that just announced its 100th consecutive quarterly dividend increase. That’s a dividend hike every 90 days for a quarter century – a feat almost unmatched.

Looking Ahead

Management has just struck another deal. On December 30, the company agreed to pay $894 million for 185 properties spanning 4.6 million square feet. These incoming properties have an average remaining lease term of 9.2 years and are complementary to the current portfolio. Roughly half of the new tenants are investment-grade, which include CVS, Lowe’s, and Hobby Lobby.

Another day, another accretive acquisition. This transaction was signed at a 7.1% cap rate, a bit higher net income yield compared to recent deals.

Get ready for more. Adjusted funds from operation (AFFO) have risen 76% over the past nine months to $1.7 billion ($2.92 per share). And with 630 consecutive monthly distributions under its belt, this well-run landlord remains a core income-producing anchor for most investors.

P.S. If you’re looking for the best high-yielders the market has to offer, then you need to check out High-Yield Investing. In each issue, we profile securities that pay yields of 5%, 7%, 9% and more. Most investors aren’t even aware these investments even exist, but they’re out there…

And in my latest report, I detail 5 of my favorite “bulletproof” high-yield securities. Each has a proven history of holding up in any market — and continually rewarding investors year after year.

Go here to learn more now.