The Motley Fool Discussion Boards

Previous Page

Industry Discussions / Real Estate Inv. Trusts: REITs


Subject:  Realty Income: The Bluest Of The Blue Chip REITs Date:  2/22/2020  7:36 AM
Author:  TMFWysocki Number:  85576 of 86335

From Seeking Alpha contributor and Reitster, Brad Thomas:


Realty Income's portfolio is highly exposed to physical real estate. However, we’re not talking about malls and shopping centers.

Its performance in recent years has been solid. And, looking forward, we expect to see similar mid to high single-digit growth.

Realty Income has outperformed its peers, as well as the major market averages, by a wide margin.


Realty recently declared its 596th consecutive monthly dividend, which means it’s been paying a monthly dividend for nearly 50 years. And that’s despite it only being a public company now for 25.

As a result of that “official” quarter-century of not only doling out dividends but also raising it, the stock was added to the S&P 500 Dividend Aristocrats Index last quarter.

Still, Realty Income, is quite pricey these days:

In the $80 area, O’s forward-looking price to FFO multiple – using the mid-point of its 2020 guidance – is 23x. And its forward-looking P/AFFO multiple is 22.7x.

These figures result in 40%+ premiums to Realty’s 20-year average in the 16x range. And they result in a 20%+ premium to the 10-year average P/FFO ratio in the 18.9x range.

Essentially, our fair value estimate of $65 implies that Realty Income is overvalued by roughly 23% right now.

Read on:

Morningstar estimates fair value at $65, too, and has a one-star "sell" price of $87.75.

Long O
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us