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An ultimate dividend payer

Realty IncomeAlthough you won’t find a perfect stock across the market floor, there is one which earned attention of millions of income seeking investors. You won’t find too many companies out there which mission is to provide income. I am talking about a California-based real estate investment trust – Realty Income (O).

It may not be a perfect stock, but it is getting closer to that definition.

This monthly dividend paying stock was beaten severely down by Mr. Market these last two days. To me the drop provided enough correction to consider adding shares to my holdings.

If you want to find why the stock fell, you probably won’t find a meaningful reason. Most of the blatant explanations out there would be circling around Big Ben’s proclamations, visions, speeches or who knows what and insane investors out there guessing what impact that may have to the nearest market’s future.

Who cares? All I care about is whether this stock will be able to continue paying the promised dividend or not.

The company has been paying dividends for consecutive 19 years and it has been raising it for consecutive 15 years. It paid dividends and raised it during 1998 – 2000 severe drop (the stock lost 30%) but the dividend never dropped, was never cut or suspended.

There are other great companies I was looking at possibly buying, such as AGNC, PPL, AT&T (T), WMT, and many others which were beaten down by market participants’ irrationality, but I decided to accumulate Realty Income stock and add more shares.

I am not buying out right, but again I will use a contingency order to buy only if the stock reverses. I entered the following order:

If the last of O is greater or equal to 51.7
Buy 19 O at limit $51.7

 

If the stock continues falling, the order will not execute and I will be lowering the buy price along with the new lower stock price. If the stock reverses and continue moving up, the order activates the limit order and I will buy 19 more shares.

I have two reasons for adding this stock. One reason is that this is a good, stable, and reliable dividend payer, the second reason is that with this purchase I will exceed 100 shares and I am planning on applying covered call strategy (although I will be very careful with this strategy, because Realty Income is not a stock I want to have called away).

What do you think? DId Realty Income dropped low enough to buy or would you wait more?

 





8 responses to “An ultimate dividend payer”

  1. One of my methods of evaluating a stock, is to look at the earnings and dividends in a recession. I think it tells a lot about a company and the industry that they are in, if they are able to keep increasing their earnings and dividends.

    When it comes to Realty Income the picture is a bit mixed. They kept increasing the dividend by an CAGR of 2.3% through out the financial crisis but the earnings fell by an annual average of 5.8%. This is not much, but still, it needs to be taken into consideration, because sooner of later, a recession will occur again. You can see the recession performance of Realty Income here:

    https://dividendplanet.com/realty-income-o-increase-history-yield

    • Martin says:

      Yes, it is a good way to look at the company and although it is not a 100% guarantee of success, the history can tell you or help you evaluate. But there were also exceptions to that. For example LGCY was one of the stocks which held well during recession and yet last year they eliminated the dividend whatsoever.

      Interesting website. Thanks for sharing and stopping by!

  2. Integrator says:

    I’ve owned O in the past. I held it during the GFC. I haven’t checked it in a while, surprised to see its more than doubled since that time. Dividend growth rate looks to have slowed a little in recent times. I don’t recall, but does O qualifies for the concessional tax on dividends ?

    • Martin says:

      Integrator, thanks for stopping by, but now I must admit, I am a bit ignorant of what you are referencing as GFC and the tax issue. Can you educate me? Thanks.

  3. sfi says:

    Be patient. Short interest has increased recently.

    We saw buyers come in yesterday in the market late, but the follow through today is selling. I see the price under $50 at $49.79. I would like a price of $42, it remains to be seen if it comes.

    • Martin says:

      Sfi, I am not buying yet. It is exactly because of what you have mentioned that the price may go lower since those Forest Gumps out there are still dumping and shorting this stock. That’s why I am using a contingency order trailing it with the price down as the price slips. Since today the price slipped down even further, at the end of the trading session I will move my buy order lower. If on Monday the stock continues lower, I will move my buy order lower again. If it reverses and goes up, it should execute and i should buy. However, I totally like this price action.
      Thanks for stopping by.

  4. I’ll be keeping an eye on O. I’d like to see it drop a bit more before investing in it. It is a great company, so the big question is whether it’s appropriately valued. I need to look a bit further into that before making a decision.

    • Martin says:

      I think this kind of company is “overvalued” at any price (well as long as it continues paying this dividend and increasing it as they do). I think we will see this baby slip lower and I am happy for it. As low as possible this stock goes as happy I will be buying it.

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