As news events increasingly alarm investors and weigh on the markets, consider real estate investment trusts (REITs) for reliable income as well as safety. They'll satisfy your craving for income and also provide a balm for your frayed nerves.
A top-quality REIT to consider now is Realty Income (O - Get Report) , which is scheduled to release earnings on Feb. 22. The REIT has long-term leases with major retail brands and other companies. In addition, it has made a number of smart purchases and is expected to achieve solid growth over the next five years. Realty Income's shares rose .57% in Tuesday trading.
REITs are particularly attractive dividend plays because they must distribute at least 90% of their taxable income each year to shareholders as dividends. They're also "all-weather" investments, which is important as political instability and predictions of an imminent stock market crash spook traders.
Although the occasional bust from a crisis does happen, REITs generally hold their value in a down market because the rents their tenants pay are contractual obligations. Rents also tend to rise with inflation, helping to offset inflation's corrosive impact on purchasing power.
These qualities make REITs the ultimate total return investment. You can collect higher-than-average yields for years, even as the value of the units rise along with the value of the REIT's property portfolio.
San Diego-based Realty Income holds over 4,300 properties owned under long-term lease agreements with regional and national retail chains and other commercial enterprises.
The average analyst expectation is that this REIT's earnings per share (EPS) will come in at 30 cents, compared to 31 cents in the same quarter a year ago. Next quarter, EPS is pegged at 30 cents, versus 25 cents in the same, year-ago quarter. Full-year EPS is projected at $1.10, compared to $1.09 last year. Next year, EPS is estimated at $1.23.
Sporting a market cap of $15.38 billion, Realty Income took advantage of low interest rates and cheap capital in 2016 to fund a series of cost-effective strategic acquisitions. Management estimates that acquisitions in full-year 2016 came to $1.25 billion, an expansion of Realty Income's real estate portfolio that will pay off handsomely in 2017 and beyond.
With a fat dividend yield of 4.25% and growing earnings, Realty Income is a haven of income in a turbulent broader market.
Realty Income's earnings growth next year is projected at 11.8%. For the next five years, earnings growth is expected to reach 5% on an annualized basis. That compares favorably to the five-year projected growth rate of peers Washington Real Estate Investment Trust at 3.90% and Welltower at 2.9%.
Realty Income operates in stable markets, where rents aren't falling and vacancy rates are low. This means the REIT can create funds from operations (FFO) growth by steadily raising rents without scaring off tenants. With Realty Income, your investment money is in good hands.
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