Realty Income Has Paid a Monthly Dividend for 673 Straight Months. Here's What That Means for Income Investors.

Many investors would be satisfied with a dividend payout streak of 12, 20, or 30 consecutive disbursements. Keep in mind that the typical dividend is paid quarterly, so there would be a gap of several months between each payment.

Now imagine a stock that not only had a run stretching back to 1969, but one that's dispensed a dividend monthly instead of quarterly, for a hard-to-believe total of 673 distributions (including its time as a privately held business). Well, no imagination is needed because such a company exists -- veteran real estate investment trust (REIT) Realty Income (NYSE: O).

Image source: Getty Images.

Generous for good reason

To be clear, Realty Income isn't constantly paying a dividend purely out of the goodness of its heart. In the U.S., since 1960, REITs have been required to distribute at least 90% of their taxable income as shareholder payouts (the requirement was raised to 95% in 1980 but returned to the original level in 2001).

This is why REITs tend to have high dividend yields, well above the current average of 1.1% for all S&P 500 index component stocks. These days, Realty Income's yield floats slightly above 5%; this crushes the S&P 500 index average and is in line with other large REITs of its type, although some specialty and distressed REITs have yields approaching or exceeding 10%.

But what investors are buying with Realty Income is a monster in the sector, with over 15,500 properties across 92 separate industries. The vast majority of these are in the company's native U.S., but at the end of the previous decade, it diversified overseas and now has assets in major European markets such as the U.K., Germany, and Spain.

The vast majority of these are rented under triple-net (NNN) lease contracts. These obligate the tenant to pay not only rent but also property taxes, insurance, and maintenance costs. Tenants are willing to accept such terms because the REIT's real estate tends to be in choice, high-traffic areas.

As a result, those tenants like to stick around. Realty Income's latest occupancy rate was a very lofty 98.9%. Not many of its properties are standing empty.

Ever-expanding footprint

With more than 15,500 revenue sources and new properties being added constantly, Realty Income is continually growing its business. In the first quarter alone, its revenue leaped 12% higher to almost $1.55 billion. Adjusted funds from operations (AFFO, widely considered to be the most accurate profitability gauge for REITs) gained 11% to $1.06 billion.

Zooming out some, thanks to growth in its legacy business and the acquisition of complementary assets, Realty Income's annual top line has nearly tripled over the past five years, from under $2.09 billion in 2021 to almost $5.76 billion last year. Not to be outdone, AFFO across that stretch advanced from $1.49 billion to $3.89 billion.

Realty Income offers the highly appealing combination of an immense, highly productive property portfolio and a dividend delivered every single month. It's more expensive on a valuation basis and has a lower yield than some other REITs, but there's a premium for size and performance. This is a very satisfying stock to own, particularly for income investors.

Eric Volkman 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.