Lanny’s Recent Stock Purchase – Realty Income (O)

My first purchase of the year.  With the market continuing the rollercoaster ride, seeing many red and many black days, I just had to make a move.  On February 12th, I made my first stock purchase of 2018.  As you read the title, this has been quite the favorite of Bert’s lately and it was time for me to add to my position.  The price was very sweet and difficult to pass up and I am very excited to write about the capital that was added.  Now let’s see what price and why I made this dividend stock purchase!

The Stock Purchase – Realty Income (O)

Realty Income (O) is a massive Real Estate Investment Trust.  I first purchased them many years ago (it could be even be back in 2013 or 2014) and they are well known as the “monthly dividend income player” in many dividend investors books.  At around $14B in market capitalization, they definitely aren’t a small player, by any means.  Further, they have increased their dividend for an incredible 19+ years, how could I not make this dividend stock purchase?  Additionally, Realty Income, in January, announced a dividend increase of 3%.  This is a very high dividend increase, for a REIT, as traditionally your dividend growth rates are low, since yields are much higher.  Realty Income has been a wonderful, monthly-dividend paying stock to own over the last few years.  At a close of $57.02 on December 29th, their stock slide to $48.25 at the time of my purchase or a 15.4% massive tumble.  Now that we know the price decline, what other metrics enticed me to make this stock purchase?

To start, the Adjusted Funds From Operations (AFFO) for the 9 months ended September 30, 2017 was $2.30.  When annualized for 12 months, this amount is $3.07.  Realty Income’s current dividend is $2.628.  This equates out to an 85% payout ratio, based on the AFFO.  The dividend yield at the price of purchase, which was $48.25, was 5.45%.  The dividend growth rate is around 5% per year, on average, over the last 3 years.  The AFFO ratio, based on the trade price, is 15.72, to which I declared this ratio similar to the price to earnings (p/e) ratio.  When I purchased HCP, I displayed O’s metrics back in December.  At that point, O had a ratio of well over 18 and seeing this in the 15 range, it was too hard to pass up, after a price decline of over 15%!  Therefore, capital was built up and deployed.

I am sure Bert is laughing extremely hard at this purchase, considering he has made this same stock purchase not once, not twice but a steaming three times over the last few weeks.  Pumped for him and I am sure he is pumped for me.  Due to the high yield that O brings to the table, as well as the tax structure related to their dividends, this purchase was made in my Roth IRA for a 2017 contribution (Remember everyone, you have time still to contribute to your IRA prior to filing your taxes before April 15th this year!).

Proof of my purchase here:

I made a stock purchase of $1,985.20 at $48.25 per share for a total of 41 shares, with a $6.95 trading fee (0.35% trading cost).  This added $107.75 to my forward dividend income.  I now have over 118 shares with this stock purchase of Realty Income (O), which pumps out over $313 in dividends per year.  Currently, each month (starting in March) will allow me to receive over $26 and, at current prices, will pick up a share every two months.  Happy that I was able to add to this monthly dividend player and bolster their current position in my portfolio!

REalty income (o) stock purchase summary & conclusion

After buying HCP in December and now O in my Roth, these are two great/high yielding REITs.  The add to my forward dividend income will be extremely appreciated.  I will begin to feel the dividend impact beginning in March of 2018, so only a little bit of time away.  Then, I am anticipating further, but smaller, dividend increases each quarter going forward.

I know this stock has been a hot one to purchase, especially during the slight correction we had.  It was between the utility companies or the REITs.  What did you end up purchasing?  Make any moves that we would not expect as a community?  Please share your thoughts below, would love to read them.  As always, I appreciate the feedback and insight you have on this investment decision!  Thank you again, everyone, good luck and happy investing!



17 thoughts on “Lanny’s Recent Stock Purchase – Realty Income (O)

  1. Looks like more or less evry dividend investor that I know i buying O. At end of last year it was T that was almost in everyones purchase list and now it is O 🙂 The buy looks very well if only it would be less exposed to retail it would be perfect. Ofcourse then the yield would less favorable as share price would be higher 🙂

  2. Lanny,
    You and Bert are making a strong move there getting O. Its fun to watch a quality stock be on such a nice sale. 5% yield growing at approximately 4% annually? Yup I’d take that.
    – Gremlin
    also Long O

    • Gremlin –

      It’s really nice from a dividend growth perspective still. Solid REIT, solid FFO ratios and the dividend yield is a very nice medium there. Not insanely high and not low. It’s “just right”.


  3. The REITs are the flavor of the day. Nice pick up. I’m shopping in the health REIT sector myself. My last three buys have been in the space and overall it looks like all REITs will remain weak for the foreseeable future. Of course, that usually means a good time to pick up some shares at better prices and higher yields. Keep growing that passive income stream.

  4. Good move on O. I’m done with 2017 contributions to my IRA, but this provides some nice insight for me to consider for my 2018 contributions. It’s an attractive yield indeed!

  5. I added to my position as well in the recent price weakness. Same deal one of my longest holdings circa 2011. It is super fun to open up my old dividend files and see how much more it is paying me since then! Have to say it is easily my favorite holding.

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