Realty Income Has Hidden Problems | Is $O Stock A Sell?

Realty Income (O) is a popular net lease REIT that has paid growing MONTHLY dividends for nearly 30 years in a row. But the "Monthly Dividend Company" has some hidden problems. Is now the time to sell? Are VICI Properties (VICI) or Essential Properties Realty Trust (EPRT) better options? Please follow me on Twitter: https://twitter.com/askjussi and subscribe to my YouTube channel.

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. 

But today, its growth is slowing down. Its internal growth prospects are below average because its leases only include 0.9% 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 at 1.5-2% 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

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