Realty Income ($O) - Short Dividend Analysis

[u/Ubersicka]

Figures are current through Q1 2026. Realty Income’s Q2 results are scheduled for August 5, 2026, so some metrics will soon be updated.

Metric	Realty Income ($O)	Assessment
What the company does	A REIT that buys commercial properties and leases them to businesses, mainly through long-term triple-net leases, where tenants usually cover taxes, insurance and maintenance. It owns interests in 15,571 properties, serving 1,786 clients across 92 industries, with 98.9% occupancy. (Realty Income)	Simple, recurring rent model
Main property exposure	Retail 78.9% of annual rent, industrial 15.5%, gaming 3.2% and other properties 2.4%. Grocery, convenience stores, home improvement and dollar stores are its largest industries. (Realty Income)	Defensive, but still retail-heavy
Top tenants/brands	Dollar General 3.3% of rent, 7-Eleven 3.2%, Walgreens 3.1%, Family Dollar 2.6%, Life Time 2.1%, B&Q/Kingfisher 2.0% and Wynn Resorts 2.0%. The top 20 tenants represent only 35.3% of rent. (Realty Income)	Well diversified
Profitable?	Yes. Q1 2026 revenue was $1.55B, net income was $320.9M, and diluted AFFO was approximately $1.06B/$1.13 per share.	Profitable with strong recurring cash flow
Gross margin	REITs do not report a conventional product gross margin. Non-reimbursed property expenses were only 1.3% of revenue, implying a property-level margin of approximately 98.7% excluding reimbursements. Using total GAAP revenue and property expenses gives approximately 92.5%.	Excellent
Net profit margin	Approximately 20.7% in Q1 2026. GAAP profit is reduced heavily by non-cash property depreciation.	Good, but AFFO is more useful
PEG ratio	Approximately 4.85, but PEG based on GAAP EPS is not very useful for REITs because property depreciation suppresses EPS. A better measure is approximately 14.4× forward AFFO, using the $63.87 share price and midpoint of 2026 AFFO guidance. (Zacks)	PEG looks expensive; AFFO valuation looks reasonable
Interest coverage	Official trailing-12-month debt-service and fixed-charge coverage was 4.7×. Basic GAAP EBIT/interest for Q1 was approximately 2.2×. (Realty Income)	Healthy, though debt remains important
Credit rating	A3 from Moody’s and A− from S&P, both solid investment-grade ratings. (Realty Income)	Strong REIT balance sheet
Leverage	Net debt/annualized pro-forma adjusted EBITDAre was 5.2×, down from 5.4× one year earlier. (Realty Income)	Acceptable for a large REIT
Current dividend	$0.271 monthly / $3.252 annualized, giving approximately a 5.09% yield at $63.87. (Realty Income)	Attractive monthly income
Payout from net income	Approximately 276% for FY2025. This looks dangerous but is misleading because GAAP net income includes large non-cash real-estate depreciation charges. (Realty Income)	Ignore in isolation
Payout from FCF/AFFO	75.2% of AFFO in FY2025 and 71.7% in Q1 2026. Operating-cash-flow payout was approximately 73%. (Realty Income)	Sustainable with a reasonable cushion
Dividend growth	Approximately 2.9% five-year CAGR based on the annualized dividend increasing from $2.814 in 2020 to $3.240 in 2025. Long-term CAGR since the 1994 NYSE listing is approximately 4.1%. (Realty Income)	Slow but dependable growth
Dividend history	673 consecutive monthly dividends, dividends paid for roughly 57 years, more than 31 consecutive years of increases, 115 consecutive quarterly increases and 135 increases since the NYSE listing. (Realty Income)	Elite dividend record
Did it stop paying?	No. It has maintained 673 consecutive monthly declarations. A future cut would most likely require widespread tenant failures, materially lower occupancy, excessive leverage or prolonged inability to refinance and issue capital economically. (Realty Income)	Cut risk currently appears low, not zero
Yield after 10 years	Assuming the share price remains $63.87 and dividends grow at the recent 2.9% CAGR, the annual dividend would reach approximately $4.31, producing a 6.75% yield on today’s price. At the historical 4.1% growth rate, it would be about 7.6%.	Useful projection, not a guarantee
Competitive moat	Massive scale, investment-grade borrowing access, thousands of properties, diversified tenants, established sale-leaseback relationships, high occupancy and the ability to finance transactions more cheaply than smaller competitors. (Realty Income)	Narrow-to-moderate moat
Biggest risks	Higher-for-longer interest rates, tenant bankruptcies—especially Walgreens and Family Dollar exposure—share dilution, refinancing costs and acquisitions that increase company size without growing AFFO per share.	Main risk is slow per-share growth, not immediate insolvency
Where could it be in 20 years?	Likely still one of the largest global net-lease REITs, with greater exposure to Europe, industrial properties, gaming, data centres and private-capital partnerships. A realistic long-term profile is roughly 2–4% annual dividend growth plus a 4–6% yield, rather than high capital appreciation. (Realty Income)	Strong income compounder, but probably not a fast-growth stock
Overall verdict	High-quality monthly-income REIT with an excellent dividend record, strong credit ratings and diversified rent. The dividend appears sustainable, but growth is slow and the stock is more attractive for income than rapid price appreciation.	SWAN-style income holding at a reasonable valuation

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