Realty Income Corp. (NYSE:O)

CAPS Rating: 4 out of 5

An equity real estate investment trust whose primary business objective is to generate dependable monthly cash distributions from a consistent and predictable level of funds from operations per share.

Recs

2
Player Avatar WalravensJean (28.82) Submitted: 6/1/2010 10:24:06 AM : Underperform Start Price: $21.50 O Score: -31.03

Ponzi, Madoff and « Realty Income (‘’O’’) » (Update)

This is one of the more overvalued stocks in the market.

Equity / Share is going down because of insanely high dividends paid with the money brought by frequent capital increases (Ponzi)

Number of shares (in mlns)
1999 : 53
2001 : 58
2003 : 71
2005 : 80
2007 : 100
2010 : 104

Dividends / Net Income
2004 : 108,0%
2005 : 121,0%
2006 : 130,4%
2007 : 135,7%
2008 : 157,7%
2010 : 185,4%

Debt is going up. :

Interest / Net Income :
2004 : 39,7%,
2005 : 46,3%,
2006 : 51,9%,
2007 ; 51,2%,
2010 : 70,8%

And valuation is going up, and up until the crash (2010, 2011, 2012 ?)

P/E:
1999 : 7,0
2001 : 8,8
2003 : 11,9
2005 : 16,9
2007 : 18,4
2009 : 22,4
2010 : 30,2

"O" was a good company, rather well managed. Their biggest mistake was probably to buy too many properties at prices too high in 2005, 2006, 2007. But other than that, they were pretty good. But even for a good company there is a reasonable value for its shares. And if this value is exceeded, it becomes a bad investment. If the Price/Earnings were 19, the Price/Book 1.8, the Price/Sales 6.3, the Price/Cash Flow 9.0 and if the Price/FFO was 10.6 then "O" would probably be a reasonable investment. For that “O” share should be worth $ 20. This is the most likely value in the medium and long term. In the short term, nobody can say when and where the bubble burst

Another way of valuation :

a) Market Cap. : 3,253,410,000 $
b) Total liabilities : 1,438,264,000 $
c) Non Real-Estate Assets : 84,214,000 $

Valuation by the market of Real-Estate Assets = a) + b) - c)
4,607,460,000 $

Number of sqf : 19,200,000

$ / sqf : 239.97 $ / sqf.
Normal price : 132 $ / sqf

This is 45% overvalued ! “O” should be worth 17,11 $

Member Avatar WalravensJean (28.82) Submitted: 8/4/2010 12:46:49 PM
Recs: 0

Some new numbers :

Ten years ago, « O » Net Income per share was growing at more than 5% per year. The growth rate has regularly declined and now it is negative.

Net Income / share :
July 2006 -> June 2007 : 1.1717 $
July 2007 -> June 2008 : 1.0544 $
July 2008 -> June 2009 : 1.0474 $
July 2009 -> June 2010 : 1,0188 $
   

From July 1995 to June 2010, median P/E was 18. Now it is 32
From July 1995 to June 2010, median Price / FFO was 12. Now it is 18.0
From July 1995 to June 2010, median Dividend / FFO was 85%. Now it is 96%
From July 1995 to June 2010, Median Dividend / Net Income was 129%. Now it is 185%

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