Can Realty Income Potentially Turn You into a Millionaire?
Realty Income Corporation (O 0.55%) has consistently been a popular choice among income-focused investors.
This real estate investment trust (REIT) boasts several appealing characteristics that many income-oriented stock enthusiasts seek. It boasts a recession-resistant operational structure due to its triple-net leases, which mean its tenants are responsible for the property's insurance, taxes, and maintenance costs. The majority of its tenants are reputable, recession-firm retailers like convenience stores and pharmacies, with notable tenants such as Walgreens and 7-Eleven. Operating in eight countries across the globe, including the United States and Europe, provides it with geographical diversity and resilience.
Furthermore, Realty Income has an impressive history of increasing its dividend payments for an uninterrupted 30-year stretch. It also stands out as one of the dividend stocks offering monthly payouts, providing investors with a more frequent income stream.
The REIT also boasts a high dividend yield of 5.4%.
However, does Realty Income possess the potential to transform an investor into a millionaire? Let's delve deeper into its offerings and analyze how it might achieve such a feat.
Current standing of Realty Income
Realty Income recently reported its third-quarter earnings, and its revenue saw a substantial boost from its acquisition of Spirit Realty a year prior.
The company's revenue for the quarter (ending Sept. 30) rose by 28.1% to $1.33 billion. While its net income grew by 12% to $261.8 million, its closely watched adjusted funds from operations (AFFO) figure increased from $721.4 million to $915.6 million. However, due to share dilution from the acquisition, the per-share growth in AFFO was marginal, from $1.02 to $1.05. Realty Income raised more capital by selling 17 million shares in an at-the-market offering, collecting $968.7 million.
Realty Income has continued its streak of issuing 108 consecutive quarterly dividend increases.
Realty Income faced a challenging start during the Trump era as investors moved away from real estate and interest rates rose due to possible deficit spending and the potential impact of tariffs on inflation. Although the Federal Funds rate expectations have been reined in, this may put pressure on REITs like Realty Income.
Dividend stocks often compete with bonds for funding, so any increase in bond yields may dissuade investors from purchasing REITs like Realty Income and instead opt for fixed income investments. Additionally, higher interest rates present challenges for Realty Income as the company borrows significant funds to acquire properties. Consequently, increased interest rates would raise the company's interest expense and borrowing costs. Lastly, higher interest rates hinder the company's debt refinancing.
Realty Income's potential to mint millionaires
Realty Income has a solid track record of generating growth through acquisitions, like Spirit Realty, and acquisitions of properties. The company, which owns over 15,000 properties, has numerous expansion possibilities ahead of it as it identifies a $4.7 trillion net lease addressable market in the United States.
Between dividends and AFFO growth, Realty Income has historically delivered an annual return of 11%. With enough time and an adequate initial investment, an investor could potentially become a millionaire at this rate of return.
For instance, if an investor began with $100,000 and gained an 11% compound annual growth rate, they would have accumulated $1 million after 22 years. While this may seem like a lengthy period, Realty Income's consistent and stable growth model sets it apart among many other investment options.
Realty Income may not offer the growth potential of a technology stock, but for patient, long-term investors, it can pave the way to becoming a millionaire.
Given the text, here are two sentences that contain the words 'investing', 'finance', and 'money':
Investors who are interested in finance and seeking reliable income streams often consider Realty Income Corporation due to its consistent track record of increasing dividend payments.
With a strategic approach to investing in Realty Income Corporation, an individual could potentially grow their money over time, as the company's historical annual return of 11% suggests.
