Realty Income (NYSE:O)

Have you ever wanted to own a piece of a retail chain like Taco Bell, Jiffy Lube, or Wawa without all of the hassles?

If the answer to that question is yes, then Realty Income is the stock for you.

They own more than 2,250 freestanding, single-tenant properties leased to retail chains under long-term net-lease agreements

What this means is they own the types of commercial properties that are unlike all of the others. Their properties are located on busy street corners or on separate parcels in large shopping centers throughout the country.

Moreover, these properties are leased to just one tenant (as opposed to a number of tenants in the same building) and that tenant is responsible for all of the taxes, maintenance and insurance on the properties, in most cases, hence the term “net-lease.”

In total, the company owns properties containing some 18.5 million leasable sq. ft. in 49 states. Top tenants include restaurants (which account for some 24% of sales), convenience stores, child care facilities, and automotive services shops.

As such, they generate dependable monthly income that that pays a 6.30% annual yield that is distributed monthly. Moreover, they have made those payments for 452 consecutive months with 42 consecutive quarterly increases.

In fact, from 1994 to April, 2008, the annualized dividend rate rose from $0.90 per share to $1.6485 per share, or 83.2%.

Now that’s what I call performance in a dividend paying stock.
 
They released their first quarter results earlier this month and they featured the following highlights:

• Revenue increased 17.0% to $83.4 million
• Funds from Operations (FFO) available to common stockholders decreased 1.3% to $45.9 million
• FFO per diluted common share was unchanged at $0.46 per share
• Net income available to common stockholders per diluted common share was $0.24 per share
• Portfolio occupancy was 97.4%
• Same store rents increased 1.5% to $65.9 million
• Invested $181.4 million in real estate at an 8.7% capitalization rate
• Dividends paid per common share increased 7.9%
• Increased the monthly dividend for the 42nd consecutive quarter to an annualized amount of $1.6485 per share

Moreover, this is one of the most retail-friendly investments that I have ever seen. A quick trip to its website @ http://www.realtyincome.com/  will give you an idea of what I mean.

Realty Income is a Buy under $26.00. Currently shares trade for $23.89.

Cheers,

Jack Aubrey
Senior Equity Analyst, Residual Income Report