Key Points
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Realty Income is a large net lease real estate investment trust.
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A $10k investment would net you roughly $45 each month based on the last dividend paid.
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Realty Income has increased its dividend annually for 32 years, with quarterly increases the norm in recent years.
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Realty Income (NYSE: O) is the largest net lease real estate investment trust (REIT). It is built from the ground up to be a boring dividend stock, with the company actually trademarking the nickname “The Monthly Dividend Company.” That speaks to both the company’s commitment to the dividend and the frequency of the payment. Both factors are incredibly important to consider if you are a dividend investor.
From a basic math perspective, a $10,000 investment would buy 168 shares of the stock as of this writing. And, based on that, the last dividend payment would create a monthly income stream of $45.61. Only Realty Income has increased its dividend annually for 32 years, which makes the math just a little more complicated. Here’s what you need to know.
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What’s up with Realty Income’s dividend?
Realty Income is a REIT, which means that it owns properties and collects rent. So long as it pays out 90% of its taxable income as dividends, it avoids corporate-level taxation. Shareholders have to pay taxes on the dividends as if they were regular income. The workaround is to own REITs like Realty Income in a Roth account, which allows the income to avoid taxation. So, when you look at the $45.61 monthly figure above, the first thing to consider is taxes, which would lower what you actually get to keep.
That said, there’s another important factor to consider: dividend growth. As noted, Realty Income has increased its dividend annually for 32 consecutive years. That’s an impressive streak, but it means that the dividend you start with in Jan. 2027 isn’t likely to be the dividend you end with in Dec. 2027. To complicate matters even more, the company has long increased its dividend quarterly. The quarterly increases are small, but if the trend continues, the dividend you collect will differ each quarter of 2027.
Increases matter, but it takes time for them to add up
In fact, the REIT just announced that the dividend paid in December will be $0.2740 per share, up from the current level of $0.2715. So, a $10,000 investment in Realty Income today will generate $46.03 per share per month in January 2027. If history is any guide, the monthly dividend will increase ever so slightly in March, June, September, and December.
Ever so slightly is the key here, because the increases in recent years have been fractions of a penny. To put that into perspective, in 2026 Realty Income’s monthly dividend started at $0.27 per share and will end at $0.274 per share. That’s a roughly 1.5% increase for the year. If that yearly increase were to repeat, your monthly dividend check might start at $46.03 in 2027 and end closer to $46.50.
On the surface, it looks like the dividend increases aren’t a very big deal. However, Realty Income is facing notable issues that have led to sluggish growth, including its expanding scale (it owns 15,500 properties) and rising interest rates. The REIT is working to adjust its business model so that it can grow more quickly, including diversifying its portfolio (geographically and by asset type) and entering adjacent markets where it believes it has the expertise to compete (loans and asset management).
Over the past 32 years, the average annualized dividend growth rate was 4.1%, and it isn’t unreasonable to expect the current growth rate to rise slightly. Getting close to 4.1% would be enough to keep up with historical inflation, protecting the buying power of the dividends you collect.
The whole dividend package is what really matters
The current yield is 5.4%. Add the 1.5% dividend increase in 2026 to that, and you get 6.9%, which is a bit below the 10% historical return investors expect from stocks. However, if you add Realty Income’s historical dividend growth rate of 4.1%, you get 9.5%, which is right in line with the broader market.
But there’s one more factor to consider here, because the 5.4% yield and monthly pay schedule mean that dividend investors can treat the dividend income like a paycheck and never have to touch principal. Or, conversely, you could pair Realty Income’s large yield with a lower-yielding but higher-growth dividend stock. So the big story here is that Realty Income is a foundational income investment that offers shareholders considerable flexibility.
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Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
