Why Realty Income Is a Dividend Investor's Dream
How can an income investor not like a business that calls itself "The Monthly Dividend Company"? Realty Income (NYSE: O) has more than earned its way onto the list of Dividend Aristocrats, companies that have increased their dividend for at least 25 consecutive years, and it's proving its strength again this year. The company generally buys single-tenant properties and leases them to businesses that are highly insulated from the economic environment. While the COVID-19 pandemic has been tough on other real estate investment trusts (REIT), Realty Income has managed to maintain and raise its monthly dividend despite the challenges posed by the pandemic.
Realty Income is a triple-net lease REIT, which is a little different than the standard retail REIT. Triple-net leases require the tenant to pay for maintenance, insurance, and taxes, and the leases are usually longer-term, with automatic rent escalators. This differs from the gross lease arrangement, where the tenant pays rent and the REIT handles maintenance and taxes (most mall REITs operate this way). The typical triple-net tenant would be a business that is largely non-discretionary in nature, like a drug store or a supermarket. During recessionary periods, people still buy groceries, personal care products, and gasoline.
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Source Fool.com
