This 5% Passive Income Stock Just Raised Its Dividend for the 108th Quarter in a Row (and More to Come)

Real estate income (A -0.32%) it is a machine that pays dividends. The real estate investment trust (REIT) recently declared its 108th consecutive quarterly dividend increase. This increase was the 127th since it went public in 1994 and continued the REIT’s 30-year streak of raising its dividend at least once a year. The company has grown its payout at a compound annual rate of 4.3% during that time.

The company’s most recent dividend increase prompted it dividend yield a bit further over the 5% mark. It will undoubtedly not be her last raise. Here’s what it does REIT such a great way to collect passive income from real estate.

Built to pay sustainable dividends

Realty Income’s mission is to provide reliable monthly dividends to its investors, which are steadily growing over time, and it certainly has over the years. A major factor that determines the reliability of its dividend is its durable real estate portfolio.

REIT at present owns a diversified portfolio of approximately 15,450 properties in the US and Europe. It focuses on owning real estate leased to retail, industrial and gaming tenants in lines of business resilient to the impact of recessions and the threat of e-commerce.

Sign for the long term net leasing with solvent tenants. This lease structure makes tenants responsible for the running costs of a property, including routine maintenance, building insurance and property taxes. These leases typically increase rental rates at a low single digit annual rate. This provides the REIT with stable and growing income to support its steadily growing dividend.

Real Estate Income pays a relatively conservative share of stable income in dividends (its payout ratio was less than 75% of adjusted funds from operations (FFO) in the second trimester). This gives the REIT a decent-sized cushion while allowing it to retain a significant amount of its cash flow to fund new investments.

The company also has a fortress-like balance sheet. It is one of eight REITs in the S&P 500 with two credit ratings of A3/A- or better. This gives Realty Income great financial flexibility and allows it to borrow money at lower rates and on better terms than companies with lower ratings.

A massive and growing market opportunity

Realty Income has grown its adjusted FFO at an annual rate of about 5% over its history (slightly faster than the REIT sector average of 4.3% during that period). It believes it can grow around the same rate over the long term, targeting annual adjusted FFO growth of 4% to 5% per share.

Three factors drive this outlook. First, Realty Income expects about 1.5% annual same-store rent growth. Meanwhile, the company expects to provides 2% to 3% annual growth on cumulative internally financed acquisitions (from ex-dividend cash flow). The expected decrease river debt expense (about 0.4% annually) and the impact of higher interest rates as it refinances debt (an annual frequency of 1% to 2%) and Reality Income should deliver annual adjusted FFO per share growth of approximately 2% from domestic sources.

On top of all this, the REIT can offer 0.5% growth of the adjusted increase in FFO per share for every billion dollars of externally financed acquisitions it makes (financed by selling stock and issuing new debt). It is conservatively expected to make between $4 billion and $6 billion in externally funded acquisitions each year, which would yield another 2% to 3% annual FFO growth per share. Add it all up and that’s 4% to 5% of adjusted FFO per share growth every year.

Real estate income should have no shortage of new investment opportunities. The opportunity in the net leasing market is vast. REIT Estimates to be $5.4 trillion in the US and $8.5 trillion in Europe. It has increased its overall market opportunity by expanding into new investment verticals such as data centers, gaming properties, other European countries and real estate loan. That extends its already long growth track.

A great way to collect a steadily growing stream of income

Real Estate Income continues to build on its success of consistent dividend growth. It should have no problem continuing to raise its dividend every quarter going forward, thanks to its sustainable portfolio, strong financial profile and broad growth drivers. Because of that, it is a great one stocks to buy if you want an attractive and steadily growing stream of passive dividend income.