Key Points

Realty Income is the largest net lease real estate investment trust. The company has a long history of increasing its dividend every quarter. The giant REIT has long been willing to experiment, something it continues to do to this day. 10 stocks we like better than Realty Income ›

From a big-picture perspective, real estate investment trust (REIT) Realty Income(NYSE: O) isn't a complex business. As a landlord, it does exactly what you would do if you owned a rental property, just on a much larger scale. But there's one fact about Realty Income that you shouldn't ignore, especially now that the company has grown to be the net lease industry's 800-pound gorilla, at nearly four times the size of its next closest competitor.

Realty Income offers a lot of positives

What is there to like about Realty Income? A lot. For example, its dividend yield is 5.6% compared to the real estate investment trust average of roughly 4.1%. The dividend has been increased each year for 30 consecutive years, with quarterly increases over the last 110 quarters, and it has an investment grade rated balance sheet. These are just some of the reasons you might want to buy this high-quality REIT.Image source: Getty Images.

But there's one small problem. Given Realty Income's size, it takes a lot of investment activity to move the needle on the income statement. To be fair, the REIT's size and many business strengths generally allow it advantaged access to capital markets. A relatively low cost of capital means it can compete aggressively for transactions. For larger transactions, it's often the only net lease REIT large enough to handle a deal.

Still, Realty Income is a slow and steady tortoise. That's highlighted by the roughly 4.3% annualized dividend growth rate over the past three decades. That's faster than the historical growth rate of inflation, so the dividend's buying power is increasing over time. But you aren't going to brag about Realty Income at a dinner party. It is a foundational investment.

Realty Income's foundation includes innovation

That brings up one of the most important things to understand about Realty Income. It isn't just doing the same thing over and over again -- it's constantly trying new things with the goal of increasing the number of levers it can pull to grow. The big one recently was the move to start investing in Europe, a market in which Realty Income's net lease approach is still underutilized.

But that's hardly the only example. It also bought a casino, using its traditional net lease model. Casinos aren't the typical property type that Realty Income invests in. It has since made a debt investment in another casino, which highlights the REIT's recent move to offer loans in addition to owning property. So not only does Realty Income now have a new asset type to invest in, it can do so in two different ways.

Story Continues

Then there's the partnership it made in the data center space. This property type is seeing material demand as the world digitizes and with the rapid growth of artificial intelligence. Sensing an opportunity, but lacking the specific experience in the property niche, Realty Income teamed up with a partner and now has another lever for growth at its disposal.

Still in the development stage is yet another "innovation" for Realty Income. It's looking to build an asset management business, where it manages money for large investors that want to own net lease properties. To be fair, other REITs have businesses like this already. But Realty Income is taking their cue and trying to add yet another avenue to support its long-term growth, this time via the fee-based income that an asset management business can generate.

Realty Income is boring and reliable, but exciting things are still going on

Besides Realty Income's geographic expansion into Europe, no single initiative highlighted above is particularly large. But they all mean the same exact thing -- that Realty Income is still experimenting and innovating in the service of sustaining its growth over time. Yes, Realty Income is boring and reliable, which conservative income investors will likely appreciate. But that doesn't mean that this industry giant is any less nimble than it was when it was smaller.

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 whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $598,613!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $753,878!*

Now, it’s worth notingStock Advisor’s total average return is922% — a market-crushing outperformance compared to169%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock 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.

Think You Know Realty Income? Here's 1 Little-Known Fact You Can't Overlook. was originally published by The Motley Fool

View Comments