High-Yield Realty Income Is a Buy if You Love Reliable Dividend Stocks

The S&P 500 index (SNPINDEX: ^GSPC) is yielding just 1.3% today. The average real estate investment trust (REIT) is offering a 4.1% yield. Realty Income's (NYSE: O) dividend yield is a far more compelling 5.8%. That high yield, however, isn't the best part of the story. The really important thing to know about Realty Income has to do with the strength of its business. Here's why you'll love Realty Income if you are looking for reliable dividend stocks.

Dividend stocks: The first step isn't the only step

Finding high-yield stocks is actually pretty easy. All you need is one simple screen: dividend yield. There's one problem with only looking at dividend yield, however, because it can lead you to companies that aren't reliable dividend payers. For example, AGNC Investment (NASDAQ: AGNC) has a huge 15% dividend yield and a history of cutting its dividend. Regular dividend reductions probably aren't what most dividend investors have in mind when they buy a dividend stock.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Image source: Getty Images.

So in addition to yield, you'll probably also want to consider dividend history. On that score, Realty Income shines. It has increased its dividend every year for 30 consecutive years. Within that streak is another one. It has increased its dividend every quarter for 110 quarters. And, as if that's not enough, the dividend is paid monthly, so it is as close to a paycheck replacement as a dividend investor can get with a dividend stock.

Taking things even deeper, Realty Income's balance sheet is investment grade rated. And the adjusted funds from operations (FFO) payout ratio was a solid 75% in the first quarter of 2025. In other words, the lofty yield on offer from Realty Income is on a very solid financial foundation.

If you are looking for a reliable dividend stock, Realty Income should be on your short list.

AGNC data by YCharts

What does Realty Income do?

Basically, Realty Income is built from the ground up to pay you reliable dividends. It is a bit of a tortoise, but it lives up to the nickname it trademarked, "The Monthly Dividend Company." For starters, Realty Income is a net lease REIT, which owns single tenant properties for which the tenant is responsible for most property-level operating costs. Although any one property is high-risk, since there's only a single tenant, across a large enough portfolio the risk is very low. Realty Income owns over 15,600 properties.

Nearly 75% of rents come from retail assets, which sounds risky given the economic uncertainty in the market today. However, retail properties are very similar to each other and they tend to be easy to buy, sell, and release as needed. And if you look back to the Great Recession, which was particularly hard on retailers, Realty Income's occupancy never fell below 96%. It knows how to survive hard times. Don't underestimate the importance of Realty Income's ability to continue increasing its dividend despite having to deal with economic adversity. When the chips are down, this REIT has proven it knows how to muddle through.

Notably, this giant net lease REIT has been taking steps to increase the number of levers it has to pull on the growth front. Realty Income's size -- it is nearly 4 times larger than its next closest peer -- gives it advantaged access to capital markets and the wherewithal to make deals that its competitors couldn't muster. Its size has also allowed Realty Income to diversify in important ways, including expanding into casinos, data centers, and asset management. And it has reached across the pond to add European properties to the mix. It is one of the most diversified REITs you can buy.

Realty Income isn't perfect, but it is foundational

If there's one problem dividend investors will have with Realty Income it will probably be its tortoise-like dividend increases. Slow and steady is the name of the game here (think low- to mid-single-digit dividend hikes), but given the above average yield that probably won't be too big a deal to most long-term dividend investors. Realty Income is really the kind of foundational investment that allows you to buy lower-yielding, but faster growing, companies. Perhaps Realty Income isn't the perfect dividend stock, but it comes awfully close.

Should you invest $1,000 in Realty Income right now?

Before you buy stock in Realty Income, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $829,879!*

Now, it’s worth noting Stock Advisor’s total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.