Realty Income is a beloved dividend stock: is it a good buy?

Realty Income (NYSE: O) stock price continued to underperform the broader market this year. It was trading at $53 on Monday, down by over 10% from its highest point in 2024, meaning that it is in a correction phase. This retreat has brought the company’s market cap to over $45 billion.

A beloved dividend aristocrat

Realty Income is one of the most beloved dividend companies in the US. It has a cult following among the income investing community, who love it for its monthly returns and the fact that it has constantly grown its dividends for decades.

This is an excellent track record considering that the past few decades have seen major events in the market, including the dot com bubble, the Covid-19 pandemic, and the Global Financial Crisis (GFC) in 2008/9.

Realty Income has done well over the years. For one, its stock has jumped from less than $2 in the 1990s to over $50 today. A $10,000 invested in the stock ten years ago is worth over $116k. This value includes the substantial share price appreciation and the dividends.

Realty Income is also highly rated by the main rating agencies like Moody’s and S&P, thanks to its relatively strong balance sheet. The company also has a strong track record of making opportunistic acquisitions in a bid to boost its shareholder returns.

Its biggest buyout in 2023 was Spirit Realty in a $9.3 billion deal. The buyout helped the company grow its size and the number of properties in its portfolio. It now has over 15,182 properties and an occupancy rate of almost 100%.

The most recent earnings report showed that Realty Income was doing well. It has a net debt-to-EBITDA ratio of 5.5x. While this is a high figure, it is in line with the company’s guidance and target. It also issued a forward guidance of AFFO target of between $4.13 to $4.21, a growth of about 4.3%.

The company also expects to spend less money on acquisitions this year. After spending over $9.3 billion in 2023, Realty Income will spend about $2 billion this year. These funds will come from its internal cash flow and its unsettled ATM.

Is it safe to buy Realty Income stock?

Realty Income vs QQQ vs Bitcoin

I believe that Realty Income is a solid investment for income-focused investors. It has a solid forward dividend yield of about 5.8%, which is higher than inflation and a risk-free return of about 4%.

The company is also quite cheap, with some analysts placing a target at about $70. That would imply a 31% upside from the current price.

However, my view is that Realty Income stock should be part of a broad portfolio of companies and ETFs. It should be part of the income portfolio.

The other part should be made of growth companies and ETFs. In this case, one could invest in ETFs like Invesco QQQ, which tracks the biggest technology companies. One can also consider investing in one of the top iShares Bitcoin ETF (IBIT), which tracks Bitcoin. Historically, Bitcoin has been the best-performing asset in the world.