1 reason why I will never sell real estate income
I own shares of approximately 40 different actions between my retirement accounts and standard (taxable) brokerage accounts. Over the years I have owned and sold dozens more. Of all of them, I can’t think of a stock I’m more likely to own for the rest of my life than Real Estate Investment Trust Real estate income (O -0.55%).
Shortly into my career, I opened a Roth IRA, and Realty Income was one of the first stocks I bought. I’ve added shares several times since. Here’s a quick look at what Realty Income does and why it’s such a great “forever” stock.
Real estate income: the short version
If you are unfamiliar with the company, here is a brief overview.
Real estate income is a real estate investment confidence, or REIT, which specializes in single-tenant properties, most of which are occupied by retail tenants. However, these are not the types of retailers you have read about filing for bankruptcy or closing stores. Think of businesses like convenience stores, pharmacies, dollar stores, and the like that thrive in all economic conditions and aren’t particularly susceptible to e-commerce disruptions.
As of mid-2020, Realty Income owns approximately 6,500 properties in the US and UK. It mainly grows by acquiring high-quality properties in its target sectors and its size has increased significantly over the past decades.
A dividend and growth machine
There are two reasons why Realty Income is a retirement investor’s dream stock. First, consider the types of properties he invests in. As mentioned earlier, most Realty Income tenants are in recession-proof businesses, and most aren’t particularly vulnerable to e-commerce headwinds. For example, convenience stores sell things (especially gasoline) that are inconvenient to sell online and that people need, regardless of how the economy is doing.
Second, Realty Income tenants sign long-term leases – known as triple net leases – which require tenants to pay property taxes, building insurance and most maintenance costs. Leases also usually have annual rent increases, or escalators, built into them. All real estate income has to do is find a tenant in place and enjoy predictable and growing income year after year.
The proof is in the numbers. Realty Income was founded in 1969, but first listed on the NYSE in 1994. Since then, the company has multiplied its dividend by 107 times and has never reduced its payouts. Realty Income has a dividend yield of 4.5% at the current share price, which is significantly above average S&P500 dividend action.
If you think Realty Income is just an income game, think again. Since its listing on the New York Stock Exchange in 1994, the stock has generated an annualized total return (dividends plus share price growth) of 15.3%. To put that into perspective, if you had invested $10,000 in the NYSE listing of Realty Income 26 years ago and reinvested your dividends, your investment today would be worth $402,000.
In short, Realty Income has been a revenue and growth machine for its investors for decades, and there’s no reason to think that’s going to change anytime soon. Since I own Realty Income shares in my retirement account and plan to earn income from them eventually, I never see myself selling my Realty Income shares.
Never say never
To be perfectly clear, I cannot say with 100% certainty that I will hold real estate income in my portfolio forever. It’s entirely possible that the company could be taken over at some point, for example – after all, Realty Income’s market capitalization is just over $21 billion, which certainly puts it in the business of lending. acquisition possible. Or, the company’s business model could theoretically pivot in a way that would make me think twice.
However, as long as Realty Income and its management team continue to do what they do, I cannot visualize my stock portfolio without Realty Income.