Realty Income shares fell from above $65 to about $55 over the past month, lifting its dividend yield from about 5% to nearly 6%. Motley Fool contributor Matt DiLallo calls it a bargain, while noting that higher rates can raise REIT borrowing costs.
Realty Income expects adjusted funds from operations (AFFO) of $4.44–$4.45 a share this year; its valuation multiple has fallen from 14.6x to 12.4x. It has A/A-/A3 credit ratings and pays out about 75% of AFFO as dividends, which the article says allows it to retain nearly $1 billion a year for investments.
Higher rates can make refinancing and new debt more expensive and draw investors toward government bonds and bank CDs, the article says. Realty Income formed partnerships over the past year that provide private capital or investment opportunities, including a U.S. and European data-center venture. It has raised its monthly dividend 136 times since going public in 1994. DiLallo has a position in the stock, and The Motley Fool also holds and recommends it.
