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Realty Income Corp O

Morningstar Rating
$52.03 +0.75 (1.46%)
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Company Report

Following Two Years of Rising Interest Rates, We Believe REITs Are Trading at Significant Discounts

We believe that there are several attractive opportunities across the US REIT sector for investors to consider. Following the recovery of many REIT sector fundamentals from the pandemic by mid-2021, we viewed the REIT sector as fairly valued through early 2022. However, the past two years have seen the rapid rise in interest rates and a slowing economy, which has led to major valuation declines across the sector. Our analysis of the REIT sector over the past 25 years suggests that the relative stock performance of REITs is negatively correlated with interest rate movements. The second and third quarters of 2023 saw large interest rate increases with the 10-year Treasury approaching 5%, which led to the sector underperforming. This occurred even as many REITs reported same-store net operating income, or NOI, growth at historical highs in 2022 due to high inflation. Higher interest rates, lower liquidity, tighter capital market conditions, and decelerating same-store NOI growth all led to a significant correction in the stock price for many REITs.

Price vs Fair Value

O is trading at a 33% discount.
Price
$51.28
Fair Value
$95.00
Uncertainty
Low
1-Star Price
$83.00
5-Star Price
$58.10
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Realty Income provides a reliable, albeit slow-growing, monthly dividend built on a steadily performing underlying portfolio through various market conditions.

Bears

It will take an increasingly greater volume of attractive risk-adjusted acquisitions to create meaningful shareholder value growth, possibly pushing Realty Income to take more risk as competition expands for its traditionally targeted assets.

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News

Trading Information

Previous Close Price
$51.28
Day Range
$51.1352.05
52-Week Range
$45.0464.18
Bid/Ask
$51.67 / $52.02
Market Cap
$44.81 Bil
Volume/Avg
5.0 Mil / 6.8 Mil

Key Statistics

Price/Earnings (Normalized)
36.91
Price/Sales
8.63
Dividend Yield (Trailing)
5.90%
Dividend Yield (Forward)
5.93%
Total Yield
5.90%

Company Profile

Realty Income owns roughly 13,400 properties, most of which are freestanding, single-tenant, triple-net-leased retail properties. Its properties are located in 49 states and Puerto Rico and are leased to 250 tenants from 47 industries. Recent acquisitions have added industrial, gaming, office, manufacturing, and distribution properties, which make up roughly 17% of revenue.
Sector
Real Estate
Industry
REIT - Retail
Stock Style Box
Mid Core
Total Number of Employees
418

Competitors

Valuation

Metric
O
REG
FRT
Price/Earnings (Normalized)
36.9128.1237.38
Price/Book Value
1.161.562.91
Price/Sales
8.637.707.08
Price/Cash Flow
12.6413.8314.49
Price/Earnings
O
REG
FRT

Financial Strength

Metric
O
REG
FRT
Quick Ratio
1.490.591.55
Current Ratio
1.530.641.55
Interest Coverage
2.103.372.45
Quick Ratio
O
REG
FRT

Profitability

Metric
O
REG
FRT
Return on Assets (Normalized)
2.07%3.33%3.11%
Return on Equity (Normalized)
3.61%6.00%9.35%
Return on Invested Capital (Normalized)
3.47%4.71%4.99%
Return on Assets
O
REG
FRT
See how this stock stacks up to its competitors with Morningstar Investor

REIT - Retail Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
SPG
Simon Property Group IncNlzrjpcmzQyls$45.7 Bil
KIM
Kimco Realty CorpJjpkxqvvMzc$11.9 Bil
UNIRF
Unibail-Rodamco-Westfield ADRVbd$10.9 Bil
UNBLF
Unibail-Rodamco-Westfield Act. SIIC ET STES FONC.EUROP.Wkjy$10.7 Bil
REG
Regency Centers CorpQybxgdzdKyj$10.7 Bil
STGPF
Scentre GroupKwxbm$10.3 Bil
LKREF
Link Real Estate Investment TrustYffv$10.2 Bil
FRT
Federal Realty Investment TrustMfwhpwtbfgSgdr$8.0 Bil
MAC
Macerich CoWclfbpcdjNtgh$3.4 Bil

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