This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

I Can't Believe It! What an O-mazing Dividend Machine

Stocks in this article: O ARCT

NEW YORK ( TheStreet) -- Realty Income (O) calls itself "the monthly dividend company." Its planned acquisition of American Realty Capital Trust (ARCT) will make that slogan as true as ever.

The company said Wednesday that it has agreed to acquire American Realty Capital Trust in a deal valued at $2.95 billion. When the deal closes in the fourth quarter of this year, Realty Income will be the 18th largest REIT in the U.S., based on total pro forma equity market capitalization. It will be twice as large as the next largest net lease REIT.

Realty Income will finance the purchase by issuing $1.9 billion of common stock to American Realty Capital Trust shareholders. It will assume about $526 million in debt and immediately repay about $574 million of outstanding debt and transaction expenses.

Under the terms if the deal, American Realty Capital Trust shareholders will receive 0.2874 Realty Income shares for each share of American Realty Capital Trust common stock they own. Based on Realty Income's closing stock price of $42.48 on Sept. 5, that's $12.21 per share. When it's over, American Realty Capital Trust shareholders are expected to own 25.6% of Realty Income's shares.

Realty Income CEO Tome A. Lewis said in a statement that the acquisition will help him achieve the strategic objectives of increasing revenue from investment-grade tenants and further diversifying the company's portfolio outside of the retail industry.

He expects the transaction to generate 20 to 22 cents per share per year in additional funds from operations -- and to allow him to increase annualized dividends by some 13 cents to approximately $1.94 per share per year.

The Dividend Machine is Bullet Proof

The acquisition should also benefit Realty Income shareholders considerably. The overall credit quality of the portfolio will improve, which will improve the stability and consistency of its rental stream.

With the addition of the new properties, the share of Realty Income's pro forma rental revenue from the company's 10 largest industries declines to 64% from 73% and the share from its 15 largest tenants declines to 42% from 49%. Its share of revenue from retail properties declines to 77% from 86%.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs