Owning dividend-paying stocks can prove rewarding as shareholders reap income and potential capital gains. If you're looking to earn a specific dollar amount, you'll need to figure out your initial investment.
Real estate investment trusts (REITs) are excellent vehicles for those seeking dividend income since they have to distribute at least 90% of their taxable earnings. Within that category, Realty Income (NYSE: O) has been a dependable dividend payer for many years. In fact, the REIT has increased dividends each year for more than a quarter of a century.
At its current dividend rate, how much would you need to invest in Realty Income to receive $1,000 in annual dividend income?
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The investment
Realty Income pays dividends monthly, and its board of directors typically raises the rate multiple times a year. Currently, it has a 26.3 cent monthly payout.
Assuming no further increases, it pays about $3.16 a year. To receive $1,000, you'd need to own 317 shares. With the shares currently trading at $62.40, you'd have to invest nearly $20,000.
Realty Income's adjusted funds from operations, a key metric for REITs since it measures cash available for distribution, grew 6% in the second quarter to $1.06 a share. This easily covered the $0.777 in quarterly dividends.
Management completed its Spirit Realty acquisition for $9.3 billion earlier this year. The deal helped diversify Realty Income's properties, although it still receives over 79% of its rent from retail properties.
While that may concern some, its properties continue to have a high occupancy rate, ending the quarter at 98.8%. During the quarter, Realty Income was able to renew leases on existing properties at a 5.7% increase.
The shares have a 5.1% dividend yield, well above the S&P 500 index's 1.3%.
With the dividend yield, high occupancy, and strong renewals, Realty Income seems like a good candidate for reliable dividend income.
Should you invest $1,000 in Realty Income right now?
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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
