Home Investments Why I Can’t Get Enough of This Passive-Income Juggernaut

Why I Can’t Get Enough of This Passive-Income Juggernaut

by Ozva Admin

I love having income-generating investments because that passive cash flow gives me more financial flexibility. I can use it to increase my passive income, make other investments or purchases, or help cover expenses in an emergency. That extra income helps me stay on track with my financial goals.

One of my favorites passive income investments are Real Estate Income (EITHER -0.84%). I can’t seem to get enough shares of the real estate investment trust (REITs). This is the reason why I continue to buy shares of a company created to pay its investors stable and growing dividend income.

A great source of income

After being on the sidelines for years, I finally added Realty Income to my portfolio in January. I have increased my position almost every month, buying shares seven times more. I now own 40 shares and plan to continue to add to that position in the future.

The main reason I am constantly buying additional shares of Realty Income is to collect more of their attractive dividend. The REIT pays a monthly dividend which currently yields more than 5%. That’s well above 1.7% dividend yield of one S&P 500 index fund

The company’s current monthly dividend payment of $0.248 per share ($2.976 annualized per share) provides me with $9.92 per month of dividend income. While that’s not a lot of money right now, I expect the payout to continue to grow in the future as you buy more stock and Realty Income increases its dividend.

That dividend payment has a solid foundation. Realty Income generates very stable income, backed by an excellent real estate portfolio. It owns more than 11,400 properties leased to tenants in industries resistant to economic downturns and insulated from the pressure of e-commerce. Uses net long-term leases (NNN), making the tenant responsible for variable costs such as building insurance, maintenance, and property taxes. Meanwhile, those leases tend to feature annual rental rate increase clauses, which steadily increase the rental income of the REIT’s existing portfolio.

Realty Income pays a conservative amount of this income through the dividend (76.5% of its adjusted funds from operations in the second quarter). That gives you some protection and allows you to retain cash to help fund new investments. The REIT also has a top-tier investment-grade balance sheet, giving you additional financial flexibility to continue to expand your portfolio of income-producing real estate.

Room to keep growing

The other thing I love about Realty Income is their ability to constantly increase their dividends. The REIT has increased its dividend 117 times since going public in 1994, including in the last 100 consecutive quarters. That easily qualifies the S&P 500 member as a dividend aristocrat.

Thanks to its strong financial profile, Realty Income should be able to continue to grow its portfolio and dividend going forward. The company bought $3.2 billion worth of property during the first half of this year. That has him on track to do more than $6 billion in deals this year. These new investments have allowed Realty Income to increase its dividend by approximately 5% over the past year.

The company should have no problem continuing to make value-enhancing acquisitions. Realty Income estimates the total global addressable net leasing market to be around $12 trillion. That should provide you with ample opportunities to make cumulative purchases.

Combined with the built-in income growth, those deals should allow Realty Income to grow its dividend at a solid pace. Add in its strong performance, and it should also be able to produce attractive total returns, making it more than just an income-focused investment.

A cornerstone of passive income

Realty Income has provided steadily growing dividend income to its investors for years. That’s the kind of company I want to help anchor my passive income, which is why I can’t seem to get enough in my portfolio. I plan to continue buying more shares each month as I have the cash to invest until I have built a more significant position.

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