The typical real estate investment trust (REIT) offers a dividend yield of roughly 3.8% today. That is well above the S&P 500‘s 1.2%.
But you’ll be able to still do higher. Real estate bellwether Realty Income (NYSE: O) is yielding 6.1%. Here’s what it’s essential to know and why now could be an excellent time to place $2,000, or more, to work on this high-yield REIT.
Realty Income is a net lease real estate investment trust. That signifies that its tenants are chargeable for paying most property-level operating costs. Although virtually all of its properties are single tenant — meaning there is a high risk if the tenant leaves — over a big enough portfolio, the chance is pretty low. The REIT is the most important player in the web lease space with over 15,400 properties.
Outside of Realty Income’s size, nevertheless, there’s not an entire lot that sets it apart while you take a look at individual metrics. For instance, W.P. Carey, the second largest net lease REIT, offers a dividend yield of 6.5%.
Meanwhile, Realty Income’s dividend growth over time has averaged around 4.3% a 12 months, while peer Agree Realty has increased its dividend by roughly 6% over the past decade. As for the dividend streak, Realty Income’s 30 consecutive annual increases fall behind NNN REIT‘s 35 years.
Even Realty Income’s general approach to its portfolio is not really unusual. It has assets within the retail and industrial sectors with a big “other” category. And it invests each domestically and in Europe. That is exactly what W.P. Carey does, too.
At the top of the day, you’ll be able to probably find net lease REITs which are higher than Realty Income on any individual metric you want. What sets it apart is its size (with a $45 billion market cap, it is almost 4 times larger than its next closest peer) and the undeniable fact that it manages to attain well across so many alternative industry metrics, even when it is not the top-performing REIT on a specific metric.
Realty Income is, in the long run, a foundational investment. It’s the type of reliable company that tends to perform fairly well 12 months in and 12 months out. You will not brag about it at a cocktail party, but you may be completely satisfied you have got it in your portfolio, sending you attractive dividend checks month in and month out.
You’ll be able to reinvest those dividends to compound your growth. Or you should use that money to pay for living expenses, since a monthly dividend is as near a paycheck substitute as you’ll be able to get.
There’s just yet another thing: Size matters in the web lease sector. Net leases are frequently financing transactions for the vendor, which is commonly an operating business like a retailer or a manufacturer.