Better Buy: Realty Income vs. Store Capital
Real estate investment trusts are a staple in income investors' portfolios because they're required to distribute at least 90% of their income as dividends, producing yields well in excess of the market's average. And they thrive best when interest rates are falling, as their costs to borrow fall but the rents they collect do not.
Realty Income (NYSE: O) and Store Capital (NYSE: STOR) are both REITs in the net-lease space (more on that shortly), but with very different histories. One has existed for half a century and has a steady record of increasing dividends -- in fact, it's trademarked the name "the Monthly Dividend Company." That's Realty Income. The other went public in 2014, but has the endorsement of legendary investor Warren Buffett. That's Store Capital. Which is better for your portfolio?
Generally speaking, there are two basic types of leases for retail REITs. The typical type is the gross lease, where where the tenant simply writes a monthly rent check and the REIT is responsible for maintenance and taxes. If you've ever rented an apartment, you signed a gross lease. The landlord paid the property taxes, and if you had any issues with the apartment, you called the superintendent. Gross leases are generally higher-risk for the landlord, but they usually have higher rents.
Source Fool.com
