O Boy – Realty Income Corp
If you have spent more than a few minutes on Twitter, Facebook, or Threads reading posts from investors, chances are you have come across O the stock symbol for Realty Income Corp. So why are people so captivated by O, and why do they insist that O is a great investment for virtually anyone?
Let’s start with what is O stock and what company is this anyway?
What Is Realty Income Corp?
Realty Income is the largest triple-net REIT in the country. A REIT is a company constructed as a trust of real estate holdings. It has over 15,000 properties, mostly of the retail establishment type. But that’s not why everyone is crazy about O. As is so often the case, the popularity comes courtesy of a very deliberate marketing strategy.
O bills itself as “The Monthly Dividend Company.” Therein lies its distinctive trait that lets it stand out in a crowded marketplace. While most companies pay dividends quarterly, or even annually, O pays dividends every month. There is nothing magic about monthly dividend payouts. Instead of holding onto the cash and making a larger payment each quarter, the company makes a smaller payout each month, but never let nuance get in the way of a good story.
Is O a Scam?
If buying and holding and waiting for a couple months while nothing happens seems unsatisfying, O putting cash into your account every month is a nice tangible benefit that you can see right away. O is not a scam. There is no trickery or fine print creating a different payout schedule that captures investors unaware. O really does pay dividends every month.
How Much Does O Pay Each Month?
Recently, the annual dividend yield for O was 6%. That works out to around half a percent per month. So, if you own $1,000 worth of O, you should earn $5 each month. Build that investment up to $10,000 and you can earn $50 each month. At $100,000, you could be earning $500 each month. If you are counting on some compound interest, don’t worry. You’ll see a variety of cents deposited each month as well.
So, Why Is O So Popular?
Investing is one of the best ways to build wealth in America. However, it can take time. In some cases it may seem like you aren’t getting any results at all, and it can be difficult to just take it on faith that you are doing the right thing. On the other hand, O provided a nice, predictable, monthly payout that you can actually see working. On social media you’ll see people bragging about their monthly payment from O. It’s hard not to want to play along too.
Is O a Good Investment?
Is O really a good investment? Should I invest in O?
The answer is, like so many things in personal finance, it depends. It depends on your goals and it depends on your other investments. It is important to remember that as a REIT, O isn’t really a company in the standard sense of the word. It’s more like a giant pool of real estate that you are investing in. The corporate wrapper around the real estate investment is insignificant in the value of O stock.
On the other hand, it is impossible to value slow moving assets like real estate on a real time basis, so much of the stock’s movement is based on news that may or may not affect the long-term value of O, or the amount of its monthly payout. It’s also important to remember that as a slow moving investment, recovering from down periods or difficulties in the real estate market can take a while.
Really, as an investor in O you are buying the monthly payment more than the Realty Income company. However, so long as you hold your investment, the price fluctuations have no effect on you or your annual dividend yield. Selling O stock, however, can result in significant losses if the timing doesn’t work out. As a pure dividend play, O is not a growth stock. It pays out its growth monthly. If you aren’t reinvesting, you should not expect a lot of capital appreciation from O.
Over the long term, O stock basically maintains the same value, offering a 0% return (plus dividends) if your timing is right. Of course, specific time periods could result in the best of both worlds, some very nice capital appreciation along with a high dividend payout. If you own O and can dictate your own holding period by having plenty of capital invested elsewhere, you can do very well investing in O. Imagine buying in at $55 and just waiting, collecting 6% paid in monthly installments for as long as it takes to go to $65. – A 20% gain for earning 6% APY is nothing to laugh at. But you need the time, and so does O.
Is O a Dividend Stock?
While O does pay dividends, it really is more of an investment in real estate than in the stock market. As such many finance types say that O is not a dividend stock in the way that people usually mean when they talk about dividend investing.