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New trade – Realty Income (O) addition – a new dividend built-up layer

I was tracking Realty Income on its way down for some time (and hopefully we are on the bottom, if not it doesn’t matter to me much) wondering why investors are dumping this great dividend paying stock. It has paid the dividend for 19 years, and increased the dividends for 15 consecutive years. The company is very shareholder friendly and it is dedicated to dividends. In its motto it even says that that they practically exist for one reason – dividends. They call themselves as a dividend company.

We are The Monthly Dividend Company®
We have a 44-year track record of providing dependable monthly income, generated by a portfolio of over 3,600 properties under long-term leases.
Tom Lewis Chief Executive Officer,

See more at Realty Income website

With that said, it is obvious that the management will do whatever it takes to make money to pay dividends so even the last old lady in the farthest corner of the country can depend on Realty Income’s income to pay for her bills in retirement.

And yet investors were selling.

Maybe they mistaken Realty Income for MBS agency mReits and thought that they might be in trouble due to rising interest rates. But Realty Income has nothing to do with MBS. How can interest rates affect their pipelines? Maybe the only reason I could come up with was that they would be purchasing new properties more expensive than today. But it is not happening (any dramatically) yet. An interest rate of 4.5% APR is still historically low. Do you remember when the rates for 30 year fixed mortgage was at 8% or even 12% APR? And yet Realty Income was able to survive and generate income in such environment.

And yet these days investors were selling.

That said, I am actually happy for the recent selloff. I was hesitant buying Realty Income when it traded at $55 a share. I know this ultimate dividend payer, which pays monthly and is yielding 5.21% will always be chased by investors seeking monthly income and thus there will always be a premium in its pricing, but $55 a share was too much even for me. So I was waiting.

And waiting paid off well. A few days ago I entered a contingency order and tracked the stock price on its way down. Today’s reversal triggered the buy order and I bought another 25 shares of this great stock at a lot better price (actually better than my overall average price which before the trade was at $43.13 a share. If I include dividends and options my overall cost basis is at $41.36 a share. I could buy even better than that by waiting for the best price).

The stock may go up from this point making nice profit. But it may also go down as those freaks in Wall Street start panicking once again. If that happens, it’s OK with me, I am still saving cash to buy more shares and if the stock continues going lower, I will buy more.

So if you are one of those who things that in the next 20 years this stock fails and the company will go belly up, please sell me your shares at the lowest price ever. I will gladly buy it.

I will buy it as I did today:

08/20/2013 09:47:32 Bought 25 O @ 40.1

Stock detail

Total shares held as of today: 142
Estimated annual dividend: $309.56
Consecutive Dividend Increase: 16 years
Dividend yield today: 5.21%
Dividend 5yr Growth: 4.44%
Dividend paid since: 1994

This trade is adding nice $54.50 annual dividend income to my portfolio. My overall income increased to $951.62 annual dividend in TD Ameritrade account.

Happy Trading!

 





4 responses to “New trade – Realty Income (O) addition – a new dividend built-up layer”

  1. Hi Martin, I have my eyes on this one as well. It has been on my watch list for the past couple years but it kept going up. I think 40 and below could be a good entry at this point. I would really like it at around 36 and a 6% yield.

    cheers,

    AA

  2. I’m still tracking O, but haven’t purchased any yet. I’m a bit low on cash at the moment. Hopefully, I’ll have some cash coming in soon. Then I can buy a few shares. Thanks for sharing.

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