Real Estate Income: Buy, Sell or Hold?

Actions of Real estate income (NYSE: O) they are trading near their 52-week highs, up about 30% from their 52-week lows since the end of 2023. The investment equation here isn’t as attractive as it was, but it’s still attractive enough for investors to buy the stock? Is it time to take the profit and move on? Or should investors sit back and own this industry-leading net lease real estate investment trust (REIT)?

We sell real estate income

If you bought Realty Income with the intention of making a run on the stock, you may be in for some sizable gains. Indeed, a 30% price increase in less than a year is a very big move, especially for a REIT that is basically known for running a boring and consistent business. The stock remains about 25% below its pre-pandemic peak. And it’s still about 20% below its 2022 highs. So there’s still reason to think there’s more upside here.

However, hanging on to hope for a return to pre-pandemic share prices could be a long shot. Part of the reason Realty Income stock has fallen so much has to do with rising interest rates in the wake of the pandemic. Rates remain high relative to pre-pandemic levels and do not appear likely to quickly return to those historically low levels. In other words, the “easy” money may have been won, suggesting it may be time for investors with a short-term focus to move on.

Has income from real estate

If you own real estate income, there are two general stories to consider. First, you bought it before the sale and are at a loss. Second, you bought it after the sell-off and are in the profits. There is a reason to remember in both scenarios.

The key is that nothing material has changed about Realty Income’s core investment approach or industry position. With a market cap of $50 billion, it remains the largest net lease REIT (net leases require tenants to pay most of the operating costs at the property level). It is about four times the size of its next closest human. This gives Realty Income key advantages in accessing the capital markets, competing for properties and making larger transactions.

Meanwhile, the REIT business is still focused on a safety-first approach. This includes an investment-grade balance sheet and a well-covered and steadily growing dividend (annual compounding is up to 29 years). If you bought Realty Income with the idea of ​​holding for the long term, selling now would probably be a mistake even if you are at a loss. And if you were brave enough to buy when the price was insane, the paper’s profit is just the icing on the cake.

The story continues

Buy real estate income

From a big picture perspective, the reason to buy Realty Income is basically the same as the reason you own it. It remains a well-positioned industry leader in the net rental space. But, the key here is that the dividend yield of 5.2% is still quite attractive. The yield on S&P 500 the index is about 1.2%, while the average REIT yield is about 3.9%. Realty Income still offers a relatively generous income stream to dividend investors.

And while the yield is down from its recent peak of more than 6%, it remains near the upper end of the stock’s 10-year return range. It’s also above the stock’s 10-year average return of about 4.5%. So the yield is attractive broadly and also relative to Realty Income’s own history. While not a flashy buy, it remains an attractive income stock.

Real estate income is still a solid choice

Frankly, Realty Income is not as attractive an investment as it was a few months ago. Short-term investors who jumped on the quick price advance here might want to sell. However, if you’re a long-term investor with an income focus, this REIT remains a solid stock to own and is probably worth buying if you don’t already own it.

Should you invest $1,000 in Real Estate Income right now?

Before buying shares in Real Estate Income, consider the following:

The Motley Fool Stock Advisor the analyst team has just identified what they think they are 10 best stocks for investors to buy now… and Real Estate Income was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $796,586!*

Stock advisor provides investors with an easy-to-follow blueprint for success, including portfolio construction guidance, regular updates from analysts, and two new stock picks every month. The Stock advisor the service has more than four times return of the S&P 500 since 2002*.

See the 10 stocks »

*The stock advisor returns starting August 12, 2024

Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions and recommends Realty Income. The Motley Fool has a disclosure policy.

Real Estate Income: Buy, Sell or Hold? was originally published by The Motley Fool