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Realty Income Stock Rises 20% in 6 Months: Will the Trend Last?
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Shares of Realty Income (O - Free Report) have gained 20.2% in the past six months compared with the industry's growth of 4.8%.
This San Diego, CA-based retail real estate investment trust (REIT) is is well-poised to benefit from its portfolio of top industries selling essential goods and services and a diversified tenant base. Also, accretive buyouts, backed by a healthy balance sheet position, bode well for growth.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 FFO per share marginally grew over the past month to $4.22.
Image Source: Zacks Investment Research
Let’s find out the factors behind the surge in the stock price.
O has a diversified portfolio with respect to the tenant, industry, geography and property type. These assure stable revenue generation for the company. As of June 30, 2024, around 36% of Realty Income’s annualized contractual rent came from properties leased to its investment-grade clients, their subsidiaries or affiliated companies.
This retail REIT derived 91% of its annualized retail contractual rental revenues from the tenants with a service, non-discretionary, low-price-point component to their business as of June 30, 2024. Such businesses are less susceptible to economic recessions and competition from Internet retailing.
Realty Income is focused on external growth through the exploration of accretive acquisition opportunities and developments. The solid property acquisitions volume at decent investment spreads has aided the company’s performance so far. During the second quarter of 2024, the company invested $805.8 million at an initial weighted average cash yield of 7.9%. In January 2024, Realty Income completed its all-stock merger transaction with Spirit Realty Capital, Inc., adding to its size, scale and diversification, enabling it to expand its scope for future growth.
Moreover, the company expects its 2024 investment volume to reach $3 billion. This is backed by an improving investment environment, mainly in Europe.
Realty Income’s Balance Sheet Position
O exited the second quarter of 2024 with $3.79 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 5.3X and a fixed charge coverage of 4.6X. 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.
A well-laddered debt maturity schedule with a weighted average maturity of 5.6 years and ample liquidity provide the company with the financial flexibility to tide over any mayhem and bank on growth scopes.
Realty Income’s Dividend Payouts
Solid dividend payouts are the biggest enticements for real estate investment trust (REIT) investors, and Realty Income is committed to boosting its shareholder wealth. The company enjoys a trademark of the phrase “The Monthly Dividend Company” and has witnessed compound annual dividend growth of 4.3% since 1994. Moreover, Realty Income has increased its dividend 23 times in the last five years and has a five-year annualized dividend growth rate of 3.05%. Check Realty Income’s dividend history here.
Negative Factors Likely to Affect Realty Income
Growing e-commerce adoption and an adverse impact on consumers’ willingness to spend amid persistent macroeconomic uncertainty raise concerns. Substantial exposure to single-tenant assets and an elevated interest rate environment add to its woes.
The Zacks Consensus Estimate for Brixmor’s 2024 FFO per share stands at $2.13, indicating an increase of 4.4% from the year-ago reported figure.
The Zacks Consensus Estimate for Tanger’s 2024 FFO per share is pinned at $2.09, suggesting year-over-year growth of 6.6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Realty Income Stock Rises 20% in 6 Months: Will the Trend Last?
Shares of Realty Income (O - Free Report) have gained 20.2% in the past six months compared with the industry's growth of 4.8%.
This San Diego, CA-based retail real estate investment trust (REIT) is is well-poised to benefit from its portfolio of top industries selling essential goods and services and a diversified tenant base. Also, accretive buyouts, backed by a healthy balance sheet position, bode well for growth.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 FFO per share marginally grew over the past month to $4.22.
Image Source: Zacks Investment Research
Let’s find out the factors behind the surge in the stock price.
O has a diversified portfolio with respect to the tenant, industry, geography and property type. These assure stable revenue generation for the company. As of June 30, 2024, around 36% of Realty Income’s annualized contractual rent came from properties leased to its investment-grade clients, their subsidiaries or affiliated companies.
This retail REIT derived 91% of its annualized retail contractual rental revenues from the tenants with a service, non-discretionary, low-price-point component to their business as of June 30, 2024. Such businesses are less susceptible to economic recessions and competition from Internet retailing.
Realty Income is focused on external growth through the exploration of accretive acquisition opportunities and developments. The solid property acquisitions volume at decent investment spreads has aided the company’s performance so far. During the second quarter of 2024, the company invested $805.8 million at an initial weighted average cash yield of 7.9%. In January 2024, Realty Income completed its all-stock merger transaction with Spirit Realty Capital, Inc., adding to its size, scale and diversification, enabling it to expand its scope for future growth.
Moreover, the company expects its 2024 investment volume to reach $3 billion. This is backed by an improving investment environment, mainly in Europe.
Realty Income’s Balance Sheet Position
O exited the second quarter of 2024 with $3.79 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 5.3X and a fixed charge coverage of 4.6X. 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.
A well-laddered debt maturity schedule with a weighted average maturity of 5.6 years and ample liquidity provide the company with the financial flexibility to tide over any mayhem and bank on growth scopes.
Realty Income’s Dividend Payouts
Solid dividend payouts are the biggest enticements for real estate investment trust (REIT) investors, and Realty Income is committed to boosting its shareholder wealth. The company enjoys a trademark of the phrase “The Monthly Dividend Company” and has witnessed compound annual dividend growth of 4.3% since 1994. Moreover, Realty Income has increased its dividend 23 times in the last five years and has a five-year annualized dividend growth rate of 3.05%. Check Realty Income’s dividend history here.
Negative Factors Likely to Affect Realty Income
Growing e-commerce adoption and an adverse impact on consumers’ willingness to spend amid persistent macroeconomic uncertainty raise concerns. Substantial exposure to single-tenant assets and an elevated interest rate environment add to its woes.
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Brixmor Property Group (BRX - Free Report) and Tanger, Inc. (SKT - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Brixmor’s 2024 FFO per share stands at $2.13, indicating an increase of 4.4% from the year-ago reported figure.
The Zacks Consensus Estimate for Tanger’s 2024 FFO per share is pinned at $2.09, suggesting year-over-year growth of 6.6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.