Realty Income Q1 2023 Results Analysis | Is $O Stock A Sell?

Realty Income (O Stock) is a popular net lease REIT that has paid growing MONTHLY dividends for nearly 30 years in a row. But the “Monthly Dividend Company” just released its Q1 2023 results and they revealed some hidden problems.…

Realty Income Q1 2023 Results Analysis | Is $O Stock A Sell?

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Realty Income (O Stock) is a popular net lease REIT that has paid growing MONTHLY dividends for nearly 30 years in a row. But the “Monthly Dividend Company” just released its Q1 2023 results and they revealed some hidden problems. Is O stock now a sell? Are VICI Properties (VICI) or Essential Properties Realty Trust (EPRT) better options? We answer these questions in this realty income analysis.

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Realty Income Q1 2023 Results Analysis

Realty Income (O) is one of the most popular REITs for individual investors because it has a great track record. It has paid growing monthly dividends for nearly 30 years, even despite the dot-com crash, the great financial crisis, and the pandemic.

The company just released strong Q1 2023 results. But these results also revealed some hidden issues concerning its growth prospects.

Its internal growth prospects are below average because its leases only include small rent hikes and its payout ratio is 75%, limiting its ability to buy more properties. Most of its net lease peers have larger rent hikes and lower payout ratios at 65-70%. Moreover, its external growth prospects are also below average because it is getting very big, which makes it harder to grow, and its investment spreads have declined recently.

Despite that, it is today priced at a higher valuation and it pays a lower dividend yield than most of its peers.

Lower growth + higher valuation = lower total returns going forward.

Image sources: Realty Income, NAREIT, YCHARTS, Canva

Important Disclaimer: Leonberg Capital holds positions in O; EPRT; and VICI. This video is impersonal and does not provide individualized advice or recommendations for any specific person. Viewers/readers should not make any investment decision without conducting their own due diligence and consulting their financial advisor about their specific situation. This video is for entertainment purposes only and you are responsible for your own investment decisions. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. This YouTube channel is managed by Leonberg Research OÜ, a subsidiary of Leonberg Capital OÜ.

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