Finding a quality dividend stock can be hard these days. Economic conditions aren't ideal and if you're not careful, relying on a risky dividend with a high yield can spell disaster for your recurring income if rates are cut unexpectedly.
If you're looking for a dividend stock to build your portfolio around or just want a high yield to add, one excellent investment to consider is Realty Income (NYSE: O). The real estate investment trust (REIT) can tick off a lot of checkmarks for investors and be a great buy for the long haul.
Here's why all income-craving investors should consider it for their portfolios.
It has excellent diversification across many industries
What's great about Realty Income is that unlike other REITs, which may focus on certain sectors of the economy, it has broad diversification. The company's portfolio spans 90 industries and it has more than 1,500 clients. It also has properties outside of just the U.S., with dozens located in Europe. Some of its top clients include Dollar Tree, Walgreens, and Dollar General.
That diversification can be extremely valuable in keeping your overall risk down by not being overly exposed to certain industries. And diversification can also provide you with some good stability in the long run. The REIT has averaged a five-year beta value of around 1, which indicates it moves fairly consistently with the overall market; investors won't normally see wild swings in its value.
The REIT routinely increases its dividend
Realty Income currently pays a dividend that yields just over 5% -- that's nearly 4 times the S&P 500 average of 1.3%. And there's plenty of incentive to hang on, too, as the stock regularly increases its payout. These aren't annual increases, either. Realty Income often raises its dividend multiple times per year. For 108 consecutive quarters (27 years), it has raised its dividend. The increases aren't often significant, but they still add up over the years.
O Dividend data by YCharts
The company has reported funds from operations (FFO) per share totaling $2.01 through the first six months of 2024, which is down only slightly from $2.05 a year ago. With its monthly dividend payments totaling around $0.26, that puts its payout ratio, based on FFO, at approximately 79%. Not only is the dividend sustainable, but there's still room for more increases.
Monthly cash flow ensures money keeps coming in
Another attractive feature about Realty Income is that it pays a dividend on a monthly basis rather than quarterly. With most dividend stocks, you'll be getting a dividend every three months. That means if you want to ensure you're getting a dividend each month, you may end up having to invest in at least three separate stocks. That's not the case with Realty Income.
The company has paid a dividend for 651 straight months (more than 54 years) and has been a rock-solid investment option for years. It's an ideal option for investors who want more consistent cash flow than what they'd get with many other dividend stocks.
Realty Income is a slam-dunk buy for income investors
Realty Income's combination of high dividends, strong diversification, and monthly cash flow make it a great stock for any income investor to consider. While it may not generate sky-high returns, the dividend income can provide you with ample ways to profit from owning the stock. Given its strong and robust operations, this is a dividend stock you can comfortably own for the long haul.
Should you invest $1,000 in Realty Income right now?
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
