Is Realty Income a good to buy?

 

September 23
Realty Income Stock Price
Keep falling

Realty Income, Ready to buy?

 

Investment Value of Realty Income 

Stock price of Realty Income have been fallen 22% this year. Stock price on January 2nd was  $64.08, the stock price on September 29th was $49.94  on 2023. The dividend yield relative to the current price is above 6%. When I calculated at the current price of $49.94, a dividend yield of exactly 6.03% can be generated. 
 
 
 

Why the stock price keep fallen? 

 

First, the question of realty income corporate value.

First of all, we need to check the business model when the price suddenly fall. You will find that the business related issues is not exists. Dividend payments are being maintained well, the dividend groth rate is increasing every month. And although paid-in capital was increased, it was also used as investment capital for other real estate (ex. Las Vegas casinos.) 
 

Second, the question of risks of running a business.

Analysts are not positive about Realty Income's investment in the Bellagio Hotel. It may be a bad investment in the short term, but Realty Income Corp always invests from a long-term perspective. Such like they purchased commercial real estate buildings at a low price when real estate values fell during the Covid pandamic period. At that time, many companies let the employee can work from home, but Realty Income thought that work-from-home syndrome would soon come to an end. 
 Considering the increase in demand for travel and leisure after the pandemic, I think Investment of Bellagio Hotel is not a bad in the long term perspective. 

Third, the overall downturn in the REITs market. 

As now, overall REITs market have been fallen. After the COVID-19 period, the vacancy rate is high due to work-from-home and the closure of small and medium-sized business, and with the added impact of high interest rates, the overall atnosphere of REITs is not good in 2023. 
 But Realty Income is a little different from general commercial real estate market. As most of its leases are focused on distribution businesses such as Walmart and 7Eleven, and most contracts are valid until 2025, there does not seem to be any operational risk. 
 

Fourth, we need to consider the economic conditions. 

We need to consider the social and political issues such like rapid rise of interest rates. Since building loans are financed through bank loans, increased costs due to interest rate increases lead to a decrease in profits on REITs. 
 The vacancy rate does not have a significant impact on Realty Income, but interest rate increases are a major obstacle to Realty Income's profit generation. 
 The high interest rate trend in the United States will remain in place for the next 1~2 years, so we need to focus whether Realty Income can respond well to high interest rates during this period. 
 
 

Realty Income Stock Price at September 29th