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Realty Income Rewards Investors With Dividend Hike: Is It Sustainable?
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Realty Income Corporation (O - Free Report) has announced an increase in its common stock monthly cash dividend to 26.35 cents per share from 26.30 cents paid out earlier. This marked its 127th dividend hike since its listing on the NYSE in 1994.
The increased amount will be paid out on Oct. 15 to shareholders on record as of Oct. 1, 2024. The latest dividend rate marks an annualized amount of $3.162 per share compared with the prior rate of $3.156. Based on the company’s share price of $62.81 on Sep. 10, the latest hike results in a dividend yield of 5%.
Though the latest hike marks a marginal increase from the prior dividend, the latest dividend announced will be the company’s 651st 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 108 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 3.05%.
O’s Business Model Supports Sustainable Dividend Payment
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. During the second quarter of 2024, O invested $805.8 million at an initial weighted average cash yield of 7.9%. The company expects its 2024 investment volume to reach $3 billion. This is backed by an improving investment environment, mainly in Europe.
Realty Income maintains a healthy balance sheet position and 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. Realty Income has a well-laddered debt-maturity schedule with a weighted average maturity of 6.3 years.
With ample financial flexibility, the company remains well-poised to respond to any challenges and bank on growth opportunities. 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.
Apart from Realty Income, VICI Properties Inc. (VICI - Free Report) and Lamar Advertising Company (LAMR - Free Report) have announced increases in dividends in recent times.
In September, VICI Properties announced a 4.2% sequential hike in its third-quarter 2024 cash dividend payment. Delighting its shareholders, the company will now pay out a dividend of 43.25 cents per share, up from 41.50 in the prior quarter. The increased dividend will be paid out on Oct. 3 to shareholders on record as of Sep.18, 2024. It marks the seventh consecutive annual dividend increase since its formation. VICI currently has a Zacks Rank #3.
In late August, Lamar Advertising announced a 7.7% sequential hike in its quarterly cash dividend. The company will now pay a dividend of $1.40 per share, up from the $1.30 paid out earlier. The increased dividend will be paid out on Sep. 30 to stockholders of record of the company’s Class A common stock and Class B common stock on Sep. 18, 2024. Lamar Advertising currently has a Zacks Rank #2 (Buy).
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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Realty Income Rewards Investors With Dividend Hike: Is It Sustainable?
Realty Income Corporation (O - Free Report) has announced an increase in its common stock monthly cash dividend to 26.35 cents per share from 26.30 cents paid out earlier. This marked its 127th dividend hike since its listing on the NYSE in 1994.
The increased amount will be paid out on Oct. 15 to shareholders on record as of Oct. 1, 2024. The latest dividend rate marks an annualized amount of $3.162 per share compared with the prior rate of $3.156. Based on the company’s share price of $62.81 on Sep. 10, the latest hike results in a dividend yield of 5%.
Though the latest hike marks a marginal increase from the prior dividend, the latest dividend announced will be the company’s 651st 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 108 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 3.05%.
O’s Business Model Supports Sustainable Dividend Payment
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. During the second quarter of 2024, O invested $805.8 million at an initial weighted average cash yield of 7.9%. The company expects its 2024 investment volume to reach $3 billion. This is backed by an improving investment environment, mainly in Europe.
Realty Income maintains a healthy balance sheet position and 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. Realty Income has a well-laddered debt-maturity schedule with a weighted average maturity of 6.3 years.
With ample financial flexibility, the company remains well-poised to respond to any challenges and bank on growth opportunities. 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.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 19.2%, outperforming its industry’s growth of 13.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Other REITs Announcing Dividend Hike
Apart from Realty Income, VICI Properties Inc. (VICI - Free Report) and Lamar Advertising Company (LAMR - Free Report) have announced increases in dividends in recent times.
In September, VICI Properties announced a 4.2% sequential hike in its third-quarter 2024 cash dividend payment. Delighting its shareholders, the company will now pay out a dividend of 43.25 cents per share, up from 41.50 in the prior quarter. The increased dividend will be paid out on Oct. 3 to shareholders on record as of Sep.18, 2024. It marks the seventh consecutive annual dividend increase since its formation. VICI currently has a Zacks Rank #3.
In late August, Lamar Advertising announced a 7.7% sequential hike in its quarterly cash dividend. The company will now pay a dividend of $1.40 per share, up from the $1.30 paid out earlier. The increased dividend will be paid out on Sep. 30 to stockholders of record of the company’s Class A common stock and Class B common stock on Sep. 18, 2024. Lamar Advertising currently has a Zacks Rank #2 (Buy).
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.