Motley Fool: Realty Income is consistently strong
Realty Income (NYSE: O) is a super-consistent real estate investment trust (REIT). It has paid more than 650 consecutive monthly dividends (over more than half a century) and has had 108 consecutive quarterly increases. Most REITs typically own many properties and lease them out; they are required to pay at least 90% of their income as dividends.
Realty Income’s dividend recently yielded around 5.5%, well above the S&P 500 index’s recent yield of 1.3%. That generous payout is on a sustainable foundation, as the company generates more than enough cash flow to cover its payments. The REIT uses its excess cash to invest in additional income-producing commercial real estate.
Realty Income also has a strong balance sheet. It’s one of only eight REITs in the S&P 500 with two A-/A3 credit ratings or better, thanks to its relatively low rate of borrowing and the quality of its portfolio. This conservative financial profile gives it the flexibility to continue expanding its real estate portfolio so that it can keep increasing its high-yielding dividend. Realty Income has grown its dividend at a 4.3% compound annual rate since going public, driven by a combination of rent growth and accretive acquisitions. Those catalysts should continue to drive its growth in the future. (The Motley Fool owns shares of and recommends Realty Income.)
My dumbest investment
My dumbest stock mistake involved not doing my research regarding an acquisition. From a long time back, I had owned shares of a company that was later bought out and went through various combinations and spinoffs, eventually ending up bought by semiconductor company Broadcom. My mistake was not doing my due diligence around the acquisition terms, as I was too busy working. I took the default cash buyout. Had I instead taken the cash and stock deal, I’d have received some stock in Broadcom, which has done well, and I would have received less taxable cash, too. – Steve, San Jose, California
The Fool responds: Broadcom has indeed been a phenomenal performer, averaging annual gains of more than 36% over the past decade (though, of course, it may not grow as quickly in the future).
It’s good to weigh your options when given a choice during a merger or acquisition. Depending on your preferences and needs, one choice might be better than the other. For example, if you owned the smaller company being acquired because you were bullish on its business but now it will be part of a huge conglomerate, you might prefer to take cash and invest it elsewhere.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Ask the Fool
Q. What are “balanced” mutual funds, and should I invest in them? – M.S., Victoria, Texas
A. While many mutual funds and exchange-traded funds focus mainly on one kind of asset, such as stocks or bonds, balanced funds feature multiple kinds of assets. That means they’ll offer gains from stock appreciation and stock dividends as well as income from bond interest. Many fund families offer balanced funds, often with different proportions of stocks versus bonds.
You can opt to invest in stock- or bond-focused funds on your own, or you might opt for one or more balanced funds. A balanced fund may not grow in value as quickly as an all-stock fund, but it can offer more stability. Be sure to favor those with low “expense ratios” (annual fees) – less than 1% for actively managed funds and 0.2% or less for passively managed index funds.
Q. I know people buy and sell stocks online. Is that safe? – C.P., Brandon, South Dakota
A. It is indeed safe as long as you’re doing so via a reputable brokerage. (We review some at Broker.Fool.com.) A decade or two ago, investors would place orders in person or by phone. But the internet has made stock trading easy, convenient and inexpensive – many brokerages now charge $0 per stock trade.
Once you choose a brokerage, you can fill out an application online or download and print the needed forms. Submit your application electronically or by mail along with a payment to fund the account. (You may be able to transfer funds electronically from your bank.) Once you have an account number and set up a password, you can review your portfolio and place a buy or sell order any time.