This Magnificent 5.7%-Yielding Dividend Stock Has Now Increased Its Payment for 110 Quarters in a Row

Realty Income's (NYSE: O) mission is to invest in places that help it "deliver dependable monthly dividends that increase over time." It has certainly delivered on that objective. The real estate investment trust (REIT) recently extended its dividend growth streak to 110 straight quarters. It has also raised its dividend 129 times since coming public in 1994, giving it dividend increases every single year for the past three decades.

With its latest raise, the REIT now yields 5.7%. It should have no trouble continuing to increase its high-yielding payout in the future, making it an excellent way to make some passive income from real estate.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

A high-quality, high-yielding payout

Realty Income is raising its monthly dividend payment to $0.268 per share, or $3.216 annually. That's a 1.5% increase from last month's dividend level and 4.5% above the year-ago level, a little higher than the 4.3% compound annual growth rate it has delivered since going public.

The REIT generates plenty of stable cash flow to cover its high-yielding dividend. It owns a diversified portfolio (retail, industrial, gaming, and other properties) net leased to many of the world's leading companies. Net leases produce very stable rental income because tenants cover all operating costs, including routine maintenance, real estate taxes, and building insurance. Meanwhile, 90% of its rent comes from properties leased to tenants in durable industries resilient to economic downturns or isolated from the pressures of e-commerce, such as grocery stores, warehouses, and casinos.

It expected to produce between $4.17 and $4.21 per share of adjusted funds from operations (FFO) last year. At its current annualized dividend level, it has a dividend payout ratio of around 77%. That gives it a nice cushion and allows the REIT to retain significant excess free cash flow to fund new income-generating real estate investments.

Meanwhile, Realty Income has an elite balance sheet. It's one of only eight REITs with two bond ratings of A3/A- or better. That gives it tremendous financial flexibility, allowing it to borrow money at lower rates and better terms.

Realty Income's combination of stable cash flow, conservative payout ratio, and elite balance sheet puts its high-yielding dividend on an extremely firm foundation.

Plenty of room to grow

Realty Income is currently the world's seventh-largest REIT, with about $58 billion of properties across eight countries. However, that's a tiny sliver of the commercial real estate market. The REIT estimates that the total addressable market for net lease real estate is $5.4 trillion in the U.S. and $8.5 trillion in Europe.

The company has taken several steps to expand its opportunity set in recent years. It has added new property types to its portfolio (e.g., gaming and data centers), expanded into additional European countries (France, Germany, and Portugal last year), and launched new investment platforms (credit and private capital fund management).

Realty Income's recently launched private capital fund management platform opens the door to the massive U.S. private real estate market. Private investors, such as pension funds, private equity, and high-net-worth individuals, own about 90% of the commercial real estate in the U.S. ($18.8 trillion). By tapping into this market, the REIT can raise additional equity capital to fund acquisitions. It will earn a management fee on this capital, which will boost the returns it earns on the money it co-invests in its private fund.

That adds to its internal capital sources from post-dividend free cash flow, non-core property sales, and balance sheet capacity. These drivers should enable the REIT to continue investing billions of dollars into building and buying additional net lease properties each year. The company's expanding portfolio should increase its rental income, allowing the REIT to continue raising the dividend.

A top-tier income stock

Realty Income is a magnificent dividend stock. It steadily raises its high-yielding dividend, enabling investors to enjoy a steadily rising stream of passive income. Given its durable portfolio, conservative financial profile, and long growth runway, that upward trend should continue. Because of that, it's a great dividend stock to buy and hold for a lucrative income stream.

Should you invest $1,000 in Realty Income right now?

Before you buy stock in Realty Income, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $823,858!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

Learn more »

*Stock Advisor returns as of February 21, 2025

Matt DiLallo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.