Dividend Growth Newsletter portfolio holding Realty Income (O) declared its 550th consecutive monthly dividend April 11. The 549th consecutive dividend was declared in March, and that dividend brought with it the 74th consecutive increase in the payout on a quarterly basis. Cumulative first quarter dividends in 2016 have advanced 4.8% over first quarter dividends in 2015.
Perhaps the most impressive aspect of Realty Income’s dividend track record is the performance the company has put up to support it, and the first quarter of 2016, released April 26, was certainly no exception for the Monthly Dividend Company. The firm reported revenue growth of more than 8% in the quarter on a year-over-year basis, driven by same-site rent growth well above 1% and an occupancy rate that continues to hover near 98%.
Realty Income is able to put up such steady results and pay such a reliable income stream due, in part, to the fact that the firm’s commercial real estate portfolio is leased under long-term agreements. Its weighted average remaining lease term as of the end of the first quarter of 2016 was 10 years. The company keeps its portfolio well diversified by leasing its 4,600+ properties to more than 240 commercial customers doing business in nearly 50 different industries.
Adjusted funds from operations (AFFO) per share growth for Realty Income was solid in the first quarter of the year as well, as the REIT-specific metric advanced 4.5% to $0.70 from the year-ago period. Notice the similarity between the increase in AFFO and the quarterly dividend increase; this type of reliable performance is what enables the long-term sustainment of the monthly dividend. Following the quarter, the company reiterated its full year guidance for AFFO to be in a range of $2.85-$2.90, representing growth of 4%-5.8% over 2015 AFFO of $2.74.
Realty Income also continued its strong momentum in acquisitions, which management attributes to the firm having the strongest balance sheet it has had in the past decade. This strength enabled the company to raise its expectations for acquisitions for the full year to $900 million from previous guidance of $750 million. The firm used its relatively low cost of capital to acquire $353 million worth in real estate in the first quarter, meaning it is already well ahead of pace to reach its updated guidance. Assuming management is making sound investments in its real estate portfolio, these acquisitions will only fuel future growth for the company, including growth in the monthly payout.
What’s not to love about a monthly dividend payer that continues to deliver sound results? We can’t find much to complain about, especially when considering Realty Income’s contribution to the capital appreciation of the Dividend Growth Newsletter portfolio (O was added at ~$44 per share). We’re going to continue to collect Realty Income’s monthly dividends for the foreseeable future.