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

The added diversification further strengthens the sources of the lease revenues that support the payment of monthly dividends.

Also, the portion of pro forma revenue generated by Realty Income's investment-grade tenants increases to 34% from approximately 19%, and Realty Income's average remaining lease term will increase to 11.4 years after the transaction from 11.1 years before it. The transaction modestly increases occupancy to 97.7% from 97.3%.

The transaction is immediately accretive, and, upon closing, Realty Income would have a pro forma enterprise value of approximately $11.4 billion and a pro forma total equity market cap of $7.6 billion, based on current prices.

Currently Realty Income's stock is overvalued at 21 times funds from operations and a significant premium to net asset value. While this is not great for investors looking to enter today, it makes an all-stock deal very compelling to Realty Income because their overvalued stock is cheap currency.

Realty Income is using that cheap currency to reinforce its already bulletproof model.

Thanks to the deal, Realty Income has said it will be able to raise its dividend by over 7% to $1.94. From an ARCT perspective, their dividend yield has fallen to a sub 5% yield from a 6% yield, but they are being paid a premium -- 12% based on closing value -- to do so. They are also getting the best management in the business.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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