Why Realty Income May Be Standing on the Edge of a Major Comeback

Over the past decade, the S&P 500 has rocketed more than 4x but Realty Income, a mere 2x and change. Not disastrous, you’d still have more than doubled your money, but far from spectacular. Yet this may be exactly where the story gets interesting.

After years of lagging, the company known as “The Monthly Dividend Company” could be sitting at an inflection point, one that patient investors may look back on as a rare entry opportunity.

Key Points

• Realty Income’s 16,000 properties boast 98% occupancy and 28 years of consecutive dividend hikes, with new growth from data centers and gaming assets.

• Higher interest rates raised borrowing costs and weighed on REIT valuations, not company performance.

• With rate cuts expected, Realty Income’s 5.3% yield and expanding portfolio could drive a strong rebound.

The Business Still Works, Exceptionally Well

Despite a decade of lackluster returns, Realty Income’s fundamentals haven’t skipped a beat.

It owns roughly 16,000 properties, mostly leased to recession-resistant tenants. Occupancy has hovered above 98% for over a quarter century, a metric that even the best landlords in the world would envy.

And that dividend is practically sacred. Realty Income has raised its payout for 112 consecutive quarters, or 28 straight years, through recessions and interest-rate shocks.

What often goes unnoticed is how the company keeps adapting. In recent years, it’s expanded into new verticals like data centers and gaming real estate.

Why the Stock Fell Behind

Over the past decade, REITs as a group have been battling a powerful headwind, rising interest rates.

When rates go up, income-focused stocks face a double punch. Investors demand higher yields, pushing down REIT prices.

At the same time, borrowing costs rise, a serious issue for a company that relies on cheap debt to acquire properties. Realty Income’s average cost of debt has risen roughly 2%  since 2020, trimming investment spreads and slowing deal flow.

Meanwhile, the S&P 500’s rally was driven by a once-in-a-generation surge in tech valuations. In that context, Realty Income didn’t fail, it just played a different game.

A Tailwind May Be Forming Again

With the Federal Reserve signaling it may begin easing rates over the next several quarters, conditions could soon flip in Realty Income’s favor. Even modest rate cuts can sharply improve REIT valuations by widening the spread between property yields and borrowing costs.

At today’s levels, Realty Income’s dividend yield is hovering around 5.3%, one of the highest in its history. That’s higher than 10-year Treasuries, giving investors both income and potential for price appreciation if yields compress.

Another overlooked catalyst is the recent expansion into continental Europe, including the U.K., Spain, and Italy. Those deals give Realty Income access to longer lease terms and inflation-linked rent escalators that many U.S. leases lack. It’s also pursuing sale-leaseback deals with corporate clients seeking liquidity, a strategy that thrives in tighter credit markets.

The Bottom Line

Realty Income isn’t a “get-rich-quick” stock, it never was. But for investors who appreciate stability, yield, and the power of compounding, the setup looks far better now than it has in years.

When the tide turns on interest rates, few companies are better positioned to benefit than this one. The same slow-and-steady model that has delivered a 90x plus return since the mid-1990s may well start outperforming again, just as everyone else stops paying attention.

If history is any guide, Realty Income tends to reward patience right when Wall Street has written it off.