Real estate income (O 1.00%) did a phenomenal job, generating passive income for its investors over the years. The Real Estate Investment Trust (REIT) has paid more than $ 9.3 billion in dividends throughout its history, steadily increasing its share price. These dividends have indeed increased for investors who have held shares in REITs in the long run.
Turning a small investment into a large revenue stream
Realty Income has been paying dividends for more than 50 years, including 27 as a publicly traded company. IN REIT has increased its dividend payment 115 times since it went public in 1994, with the last 98 coming in consecutive quarters. Overall, it has boosted investors every year since it went public, placing it in the elite class of Dividend aristocrats.
To put this dividend growth in perspective, we will look at a hypothetical investment of 100 stocks made a decade ago, which would have cost about $ 3,500. Given the share price of Realty Income and the payment of dividends at the time, this initial investment would have a dividend yield of about 5%. This means that investors would generate about $ 175 dividend income in this first year.
This annual revenue stream would grow steadily over the next decade, with REIT increasing its payout by about 70% over that period. At the company’s current dividend rate, this initial investment would generate nearly $ 300 in annual dividend income. This assumes a yield from the initial price of about 8.5%.
Meanwhile, the cumulative dividend income over the last decade will be about $ 2,700. This means that investors have already returned approximately 77% of their initial investment through dividends alone. In addition, they would benefit from a certain increase in the share price. Real estate earnings shares have doubled in the last decade. This pushed the value of the initial investment to about $ 7,000 at the recent share price.
And all of these calculations do not include the combined effect of the dividend reinvestment plan (DRIP), which takes your dividend income and uses it to buy more shares than the shares. This in turn increases the amount of your dividend from the additional shares you buy.
The key to realty Income dividend growth success
Real estate income focuses on the payment of a monthly dividend that it increases regularly. Given this focus on providing investors with a reliable and growing revenue stream, REIT takes a conservative approach.
It starts with the types of properties it targets. REIT is looking for diversified sources of leasing income by client, industry, geography and property type. It focuses on owning free-standing properties and signing net leases with high-quality tenants working in the long-term sectors. This leasing structure makes the tenant responsible for maintenance, building insurance and real estate taxes, which allows Realty Income to collect very stable rental income. Meanwhile, REIT’s diversified approach and focus on quality and durability help reduce risk by improving the sustainability of rental income.
Another key aspect of the REIT’s strategy is its conservative financial profile. Realty Income has paid out an average of about 75% of its adjusted funds from operations in 2022. This reasonable payout ratio gives it a cushion to maintain its dividend during difficult times, while allowing it to keep some money for investment purposes. Meanwhile, it also has one of the highest credit ratings in the REIT sector. This increases his access to lower-cost financing. These functions give him a lot of financial flexibility to continue to acquire profitable commercial real estate.
Acquisitions have been a major driver of real estate income growth over the years. It has made $ 29.4 billion in real estate investments since 2010. This includes several large-scale deals – the American Realty Capital Trust in 2013 and VEREIT in 2021 – and a steady stream of sale-reverse lease transactions for acquisition of properties directly from owners-operators. REIT expects to buy more than $ 5 billion in real estate in 2022 alone, which should allow it to continue to increase its dividend.
Great long-term investment for income seekers
Realty Income has done a phenomenal job, increasing its dividend over the years. This allowed REIT to turn a relatively small initial investment into a much larger revenue stream over time. Given its conservative approach, it should be able to continue to grow its dividend in the coming years. This makes it an ideal promotion for income-focused investors with a long time horizon.