Realty Income Corp. (NYSE:O)

solid dividend, good market space.....saw on SA

One of two Scottrade breakouts.

Dividends... 5.1% payout

2 stars??????? lol

Stable dividend creation machine, plus the expectation that real estate will inevitably rise again.

Great dividend oppurtunity here.

dividend play all the way. 400 some dividend increases speaks volumes

building up the retirement portfolio, this is a must, longing

All you need to know about O is that it has raised its dividend every quarter for 17 years.... oh, and it pays monthly. I have one word for you, compounding.

As the real estate market continues to lag, this REIT has a window of opportunity to garner some real bargains. 96% occupancy rate on their existing holdings and a good dividend

Here's a discussion I had with another poster on another board. It changed my mind about O.

"Bonkthegrups, look at it another way.
Has O's valuation relative to income changed significantly over the past several years?
If not, wouldn't it be fair to say that the market has determined that O has been fairly valued over that time frame?
And wouldn't it then be fair to say it is fairly valued now?"

Ahhh, someone willing to actually discuss things on a discussion board. Thank you.

Your question is a good one. There are a couple of ways of answering - on an absolute basis, and a relative basis.

First on an absolute basis, where has O traded as a multiple of AFFO (i.e. what it can pay out).

For simplicity let's look back at the last several years and the stock price at year end:

FFO per share:

1999: 1.23
2000: 1.26
2001: 1.33
2002: 1.38
2003: 1.46
2004: 1.50
2005: 1.62
2006: 1.73
2007: 1.89
2008: 1.83
2009: 1.84
2010: 1.83

Now lets's look at the share price and multiple at each year end:

1999: 10.31
2000: 12.43
2001: 14.70
2002: 17.50
2003: 20.00
2004: 25.29
2005: 21.62
2006: 27.70
2007: 27.02
2008: 23.15
2009: 25.91 (traded at 15 in Mar/09)
2010: 34.20

Now the multiples:

1999: 8.4x
2000: 9.9x
2001: 11.0x
2002: 12.7x
2003: 13.7x
2004: 16.9x
2005: 13.4x
2006: 16.0x
2007: 14.3x
2008: 12.7x
2009: 14.1x
2010: 18.7x

Please do your own math as these are my quick calcs.

But on the surface you can see that:

a) the multiple is at an all-time extreme high

b) FFO per share consistently grew in years past but for past 4 years has been flat to downish (hard to grow cash flow on a per share basis when you pay all of it out)

Now, one of the key drivers here is interest rates that are at extreme lows - forcing investors to bid up assets that yield something - the question I have is what happens to "O" if and when rates normalize.

If say the 10-year government bond goes back up to the 5% range (from the 3.4% current range) where it was in 2007 - say the multiple goes to the 14x range (where it was at the end of 2007) - that would be a share price of $25.60.

Back in 2000 the 10 year rate was in the 6-6.75% range and O traded at around 10x which would be a $18.30 share price (roughly half of what it is today).

This is why I'm saying an O bet needs to be looked at in conjuction with one's views of the economy and interest rates.

div

100

high earnings.

I'd really like to give this company the benefit of the doubt, but I just don't think it can keep the title "The Dividend Company" for long. The DPR has been growing faster than earnings!!

Well positioned, well run. Excellent history.

Div. pay out has been higher than EPS for past several years.

Monthly Dividend saved the value of my portfolio, reinvesting the money for free, thank you Sharebuilder.

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 $