Dividend shares are wealth-creating investments. The typical dividend payer has considerably outperformed non-dividend shares over the long run. They’ve produced a median annual complete return of 9.2%, in contrast with 4.3% for non-payers over the previous 50 years, in response to information from Ned Davis Analysis and Hartford Funds.
Realty Revenue (O 1.39%) is not your common dividend inventory. The main actual property funding belief (REIT) has delivered a 13.4% compound common annual complete return since its public market itemizing in 1994. The corporate’s steadily growing dividend has contributed to its capacity to develop shareholder worth over the long run. It may well flip a comparatively modest funding right into a a lot larger future payday.
A strong wealth creator
Realty Revenue has grown tremendously through the years. In 1996, it owned $565 million of economic actual property. Right now, it is the seventh largest REIT on the planet, with over $58 billion in actual property throughout eight nations.
The owner hasn’t grown simply to develop. Its growth has steadily created extra worth for its buyers as a result of it has centered on making accretive new investments that elevated its money stream per share. The REIT has grown its adjusted funds from operations (FFO) per share at a 5% compound annual fee because it got here public. It solely skilled one yr when it did not ship optimistic adjusted FFO per share progress. That was in 2009, throughout the monetary disaster.
Realty Revenue’s rising money stream has enabled it to steadily improve its high-yielding dividend, which at present sits at 5.6%. The REIT has raised its dividend 129 instances since coming public, together with the previous 110 quarters in a row and all 30 years. Total, it has grown its dividend at a 4.3% compound annual fee.
This mix of revenue and progress has actually added up through the years:
Picture supply: Realty Revenue.
As that slide reveals, a $100 funding made into Realty Revenue when it got here public would have grown into over $4,000 if you happen to reinvested your rising dividend revenue into shopping for extra shares. That is lots more cash than an investor would have made by parking that $100 into an index fund.
Properly positioned to proceed rising shareholder worth
Realty Revenue has laid a powerful basis to proceed constructing worth for shareholders. The REIT has a diversified portfolio of properties — together with retail, industrial, gaming, and others — leased to lots of the world’s main firms. It builds and buys properties secured by internet leases with creditworthy working tenants doing enterprise in industries largely resilient to financial downturns and remoted from the pressures of e-commerce. Its portfolio thus produces very steady rental revenue that grows by round 1% per yr as its long-term leases escalate rents.
The REIT pays out about 75% of its regular rental revenue in dividends. It retains the remainder to assist fund new income-generating actual property investments. That amounted to $930 million final yr.
Realty Revenue additionally has an elite stability sheet. It is considered one of solely eight REITs with two bond scores of A3/A- or larger. That allows it to borrow cash at decrease price and at higher phrases than lower-rated REITs can do.
There must be no scarcity of funding alternatives to proceed placing capital to work. Realty Revenue estimates that there’s $5.4 trillion of economic actual property appropriate for internet leases within the U.S. and one other $8.5 trillion in Europe. It has enhanced its progress prospects by including new property verticals, together with gaming and information facilities; increasing into extra worldwide markets, together with France, Germany, and Portugal; and launching new funding platforms, equivalent to credit score and personal capital administration. Increasing its platform has offered the REIT with new progress alternatives and the pliability to take a position the place it will probably earn the best returns.
Purchase and neglect
Realty Revenue is a confirmed wealth creator. The REIT has steadily expanded its portfolio, money stream per share, and high-yielding dividend through the years. That progress is more likely to proceed, given the energy of its portfolio, monetary profile, and growth prospects. It is a fantastic inventory to purchase and maintain for the very long run.
Matt DiLallo has positions in Realty Revenue. The Motley Idiot has positions in and recommends Realty Revenue. The Motley Idiot has a disclosure coverage.
