3 Bold Predictions for Realty Income in 2026

Realty Income (NYSE: O) is one of the largest and most popular real estate investment trusts (REITs). A big driver of its popularity is its high-yielding and steadily rising monthly dividend. The REIT enters 2026 with a 5.8% yield and a streak of 113 consecutive quarterly increases.

It's a safe bet to predict the REIT will increase its dividend in 2026. Here are three predictions for Realty Income that are a bit bolder.

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Realty Income will beat the S&P 500

Realty Income underperformed the market last year. Its share price only rose 5.5% compared to a more than 16% return for the S&P 500. Even adding in the REIT's high-yielding dividend only boosted its total return to 11.7%. That continued the REIT's underperformance in more recent years.

While Realty Income has underperformed the market in the short term, it has been a much stronger performer over the long term. The REIT has delivered a 13.7% average annual total return since its public market listing in 1994. It has historically paid an average dividend yield of 6% while growing its funds from operations (FFO) at a rate of around 5% annually, supporting a compound annual dividend growth rate of 4.2%. However, its growth rate has slowed in more recent years due to the impact of higher interest rates.

I expect its interest rate headwind to fade in 2026. That helps drive my bold view that Realty Income will outperform the market over the coming year.

Realty Income will continue its geographic expansion

Realty Income is one of the largest REITs in the world with over 15,500 properties in nine countries (U.S. and Europe). The company has been steadily expanding into new geographies. It entered the U.K. in 2019 and began investing in continental Europe two years later.

In early 2024, the company completed its first pan-European sale-leaseback transaction with Decathlon. It bought 82 retail properties across Germany, France, Spain, and Portugal. That initial deal was only for a small piece of Decathlon's global operations, which includes over 1,750 stores in more than 70 territories, including 27 in Europe, 14 in Asia, and four in Latin America. This transaction will likely be the first of many between the two companies.

I predict that Realty Income will complete at least one large sale-leaseback transaction or portfolio acquisition in 2026 that will further expand its geographical reach. The company sees an $8.5 trillion market opportunity in Europe alone. Additionally, it could move into new regions, such as Asia or other countries in the Americas, by expanding its relationships with existing global partners, such as Decathlon.

Realty Income will add a new property vertical

Realty Income has been steadily diversifying its portfolio. It began by investing in freestanding U.S. net-lease retail properties, followed by expansions into industrial (2011), gaming (2022), and data center (2023) properties. This diversification has given the REIT more flexibility and increased its total addressable market opportunity.

There are multiple additional property types suitable for net leases, including offices, self-storage facilities, certain healthcare facilities, agricultural properties, and experiential real estate. While Realty Income is unlikely to invest in office properties again (it completed the spin-off of its office REIT, Orion Properties, in 2022), it will continue to diversify its platform.

Expanding further into experiential real estate (e.g., attractions, golf resorts, and eat & play venues) is one opportunity. It's a more than $100 billion total addressable market opportunity in the U.S. One possibility is partnering with a company like Six Flags, which is under activist pressure to unlock the value of its real estate. Realty Income is one of the few REITs with the scale to partner with the amusement park operator on its real estate, which it could do via a sale-leaseback transaction, joint venture agreement, or credit investment.

2026 should be a busy year

I'm anticipating that this coming year will be a busy one for Realty Income. I predict that it will continue its international expansion while further diversifying its portfolio. These moves, along with lower interest rates, should enable the REIT to deliver market-beating total returns for investors in the coming year. This conviction drives my plan to continue adding to my position in 2026.

Matt DiLallo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income and Six Flags Entertainment. The Motley Fool has a disclosure policy.