Realty Income stock sits and waits at a key support

on May 30, 2023
  • Realty Income share price has dropped to a key support level.
  • The shares have retreated because of the rising interest rates.
  • A drop below the support at $57 will see it move to $53.94.

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Realty Income (NYSE: O) stock price has been in a downward trend this year as concerns in the REIT industry continue. The stock has plunged by more than 6% this year, underperforming the S&P 500 index and the Schwab US REIT ETF (SCHH).

Is Realty Income a good stock?

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Realty Income is one of the biggest Real Estate Investment Trust (REIT) companies in the US with a market cap of over $39.6 billion. The company has a forward dividend yield of 5.22%, which is higher than the one offered by SCHH ETF.

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Realty Income is a REIT company that provides triple-net-lease properties in the US, Spain, and Italy. A net-lease REIT is different from other companies in the industry in that tenants are responsible for all expenses and repairs. As a result, the company does not have huge capital expenditures (Capex).

Realty Income has a highly diversified portfolio of tenants. Dollar General, a well-known dollar store, is the biggest tenant as it makes up to 4% of contractual rent. The other biggest customers are Walgreens, 7-eleven, Wynn Resorts, LA Fitness, and Dollar Tree among others.

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Cineworld, the giant movie theatre company, is also a major tenant of the company. The company’s total rent represents about 1.3% of its annualized rent. While Cineworld has filed for bankruptcy, the company has continued making payments.

The most recent results show that Realty Income made $944.4 million in the first quarter, beating the consensus estimate of $883 million. It had made $888.7 million in the previous quarter and from $807 million in the same quarter in 2022.

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Realty Income’s same store rental revenue rose to $719 million while total expenses jumped to $723.7 million. 

Analysts are bullish on Realty Income for several reasons. They cite that the company is a dividend aristocrat that has raised dividends 632 times or for 28 years. Further, analysts believe that the company is undervalued, as it trades at a P/FFO multiple of 15.11. 

Realty Income stock price forecast

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The daily chart shows that the Realty Income share price has been in a strong bearish trend in the past few days. It is trading at $58.90, the lowest level on March 23rd. The stock has moved below the 50-day and 25-day exponential moving averages (EMA). Similarly, the Relative Strength Index (RSI) is approaching the oversold level.

Therefore, the stock will likely continue falling as sellers target the next key support level at $53.94, which is about 8% below the current level. This price was the lowest point on October 14.

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