Realty Income (O 0.04%) has increased its dividend over time in a remarkable way. The REIT has increased its payout 121 times, including for the past 103 consecutive quarters, since it was first listed on the public market in 1994. It has boosted its dividend by a total of 3.2% compared to the prior year.
There is a $1.6 trillion opportunity to buy real estate from major firms
The company’s constantly expanding portfolio of income-producing real estate is a significant contributor to the rising dividend. Property purchases made by Realty Income totaled $3.1 billion in just the second quarter. It estimates that there is a $1.6 trillion opportunity to buy real estate from major firms in its target areas, and it anticipates a huge growth runway ahead. These elements put the REIT in a fantastic position to keep raising its dividend, which yields 5.4%.
The initial projection for Realty Income was for this year to be a $5 billion year for real estate acquisitions. In contrast, it currently projects that its investment volume will exceed $7 billion by 2023.
The Motley Fool reported that its achievement so far this year is one of the things boosting its acquisition prospects. By the end of the second quarter, the REIT had already spent roughly $4.8 billion buying or building almost 1,000 properties. The most prominent deal involved the acquisition of 414 single-tenant convenience stores in the United States from the largest convenience retailer based in the United Kingdom, EG Group. In the second quarter, the $1.5 billion deal was finalized.
Additionally, the business is doing better at closing the agreements it sources. In 2023, it purchased 15% of the volume of investments it had sourced, which was higher than the 7% rate it had been averaging over the previous five years. Due to rising interest rates, competitors don’t have as much access to finance, so it isn’t as competitive when making acquisitions. However, because of the pressure from rising interest rates, sellers are more motivated.
Additionally, Realty Income keeps growing into new geographical areas and property kinds. During the second quarter, it made its initial investments in Ireland by paying $54 million for two properties. It also completed its first transaction in Italy recently, established a vertical farming real estate development collaboration, and made investments in the gaming and consumer-focused medical industries. The company’s potential for future growth is increased by its ongoing expansion into new markets.
Roy: $1.6 trillion in real estate owned by 300 of the biggest publicly traded firms in the US
Future buying prospects are anticipated to be much more plentiful, according to Realty Income. On the conference call for the company’s second quarter, CEO Sumit Roy spoke about one of the key elements that could spur an increase in the amount of acquisitions.
Roy notes that around $1.6 trillion in real estate is owned by 300 of the biggest publicly traded firms in the United States. As businesses approach a big debt maturity wall in the upcoming years, that real estate could be a crucial source of liquidity. They can sell their real estate to a firm like Realty Income in a sale-leaseback arrangement and utilize the proceeds to pay down debt rather than refinancing their debt at significantly higher rates. By taking this course, businesses could reduce their balance sheet debt while removing the danger of eventual maturity. The possibility of having to refinance debt again in a few years, maybe at a higher rate, would be avoided by sellers by signing long-term leases that lock in the cost.
By the end of the first half, Realty Income had practically attained its initial 2023 purchase volume target. It has raised its expectations as a result of that. Due to the large amount of corporate debt that will mature in the upcoming years, the REIT may continue to experience increased acquisition volumes. In order to pay off debt, more businesses may decide to arrange sale-leaseback agreements rather to refinance at higher interest rates.
This catalyst is encouraging for Realty Income’s fantastic dividend, which may increase even more quickly in the future. As a result, investors looking for a lucrative and expanding passive income stream will find the REIT to be an even more alluring choice, reports from The Motley Fool.