1 Reason I'd Buy Realty Income Stock and Never Sell Its Monthly Dividend Stream.

I started buying shares of Realty Income (NYSE: O) a few years ago. What initially drew me to the real estate investment trust (REIT) was its high-yielding monthly dividend. As someone who desires to generate passive income, that combination of yield and payment frequency was hard to beat.

While the current income stream is a reason to buy, the REIT's ability to deliver a positive total operational returns (dividend income plus earnings growth) each year is why I'll never sell.

Image source: Getty Images.

The total picture

Delivering dependable monthly dividends is a core aspect of Realty Income's mission. The REIT has paid 669 consecutive monthly dividends since its founding over 50 years ago. It has historically offered investors a dividend yield of around 5.7%. That high-yielding monthly income stream delivers a tangible return investors can count on year in and year out.

In addition to income, Realty Income also aims to deliver consistent growth (both dividend and earnings). The REIT has increased its earnings -- as measured by adjusted funds from operations (AFFO) -- in all but one year since going public in 1994. Meanwhile, it has increased its dividend every single year (31 years in a row and 114 consecutive quarters). This growth adds to the REIT's total operational return. Realty Income has delivered a positive operational total return every year, typically in the range of 8% to 12%.

Built to continue growing shareholder value

As the saying goes, past performance is no guarantee of future results. However, Realty Income is in a strong position to continue growing its dividend and shareholder value.

The REIT has built a strong foundation on the pillars of its high-quality real estate portfolio and financial profile. Realty Income owns a diversified portfolio of over 15,500 retail, industrial, gaming, and other properties secured by net leases with many of the world's leading companies. It primarily owns properties leased to tenants in industries resilient to economic downturns and the pressures of e-commerce. As a result, it should continue generating stable rental income to support its high-yielding dividend.

Meanwhile, Realty Income has a strong financial profile. It pays out a conservative percentage of its stable income in dividends (about 75% of its AFFO), enabling it to retain substantial cash to reinvest in new properties (over $925 million in adjusted free cash flow last year). Realty Income also has a strong investment-grade balance sheet (A3/A- credit ratings) backed by a low leverage ratio. Additionally, the REIT has several funding partnerships with high-quality investment firms. That gives it ample financial flexibility to continue growing its portfolio.

Realty Income expects to invest $8 billion into new properties this year. That's a fraction of the $14 trillion total addressable market for net lease real estate across the U.S. and Europe, giving it a very long growth runway.

Income and growth throughout the cycle

Realty Income's ability to generate solid total operational returns in both good markets and bad is why I'll never sell this REIT. It should provide me with a steadily growing stream of dividend income each month while also delivering earnings growth that should increase the value of my shares. That income and wealth growth combination makes it an anchor holding in my portfolio.

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