Stock Market Sell-Off: 1 Super Safe Stock I Plan to Buy Hand Over Fist if the Market Keeps Falling

Volatility has returned to the stock market again in recent weeks. The Nasdaq has already corrected by declining more than 10% from its peak, while the S&P 500 is approaching that level. Many stocks are down even more than that.

While stock market corrections can be challenging, they often provide the opportunity to buy some high-quality stocks at better prices. One stock I have my eye on amid the sell-off is Realty Income (NYSE: O). If the stock market decline intensifies, I plan to load up on more shares of this super safe real estate investment trust (REIT).

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Built to withstand recessions

The catalyst causing the recent stock market sell-off is concerns that the Trump administration's tariff policies will cause a recession. An economic downturn can have a significant impact on the corporate earnings of cyclical companies.

While the commercial real estate sector has some cyclicality, Realty Income has built its portfolio and financial profile to handle even the most challenging economic storms. The REIT owns a diversified portfolio of high-quality properties leased to many of the world's leading companies. It focuses on owning buildings leased to tenants in durable industries (91% of its rent is resilient to economic downturns or isolated from the pressures of e-commerce). That helps mute the risk that a recession could impact its tenants' ability to pay rent.

Meanwhile, unlike cyclical industries where revenues rise and fall with the economy, Realty Income's rental revenues are incredibly stable. The REIT utilizes net leases, which require that tenants cover all operating costs, including routine maintenance, real estate taxes, and building insurance. Meanwhile, most of its leases escalate rents at a fixed annual rate. As a result, the rental income of its existing portfolio should rise by about 1% this year even if there's a recession.

Realty Income's portfolio has proven its durability over the years. In its 30 years as a publicly traded company, the REIT has only experienced one year when its adjusted funds from operations (FFO) per share declined (during the financial crisis of 2009). However, it still posted a positive operational return that year (adjusted FFO per-share growth/decline plus dividend income yield), as it has every single year since it went public. Meanwhile, its stable and steadily rising cash flow has enabled the REIT to increase its dividend every single year, including the past 110 quarters in a row.

A financial fortress

Realty Income also has an incredibly strong financial profile. The REIT pays out slightly less than 75% of its stable adjusted FFO in dividends. That gives it a sizable cushion to withstand any recessionary hit to its cash flow. Meanwhile, that low payout ratio enables the REIT to retain substantial cash to fund new income-generating real estate investments ($930 million last year). Because of that, it can continue growing its portfolio even during a recession.

Realty Income also has an elite balance sheet. It's one of only eight REITs in the S&P 500 with two bond ratings of A3/A- or better. That strong credit gives it greater access to capital and better terms. Because of that, it can still borrow money to fund new real estate investments during a recession.

The REIT's embedded rent growth and strong financial profile drive its outlook that it can continue growing its portfolio and adjusted FFO per share this year. It's targeting to invest at least $4 billion into new properties this year, which should support about 2% growth in its adjusted FFO per share. It could invest even more and grow faster if there's a recession since that would likely cause interest rates to fall, making it easier to fund additional accretive investments with lower-cost debt.

Waiting for an even better buying opportunity

Shares of Realty Income have declined by more than 10% from their recent high, which has pushed its dividend yield up to around 5.7%. I'd jump at the opportunity to boost my position if the yield rose to around 6% due to a continued slump in its stock price. That high-yielding payout would be incredibly safe and should continue growing through future recessions.

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