1 Growth Stock Down 25% to Buy Right Now

At first glance, the decline Real estate income (A -0.62%) it may not seem deep. A 25% decline puts it barely into bear market territory, and in a world where many prominent stocks are still down 75% or more from their 2021 bear market, such a decline seems less significant.

However, investors should note that it is down 25% from before the pandemic! Although it is up significantly from 2020 lows, high interest rates appear to have derailed a potential recovery.

However, with interest rates falling, Realty Income stock has started to gain some traction. Given the state of the business, investors may want to consider buying while it is still low.

Real estate income as a business

At its core, Realty Income is a real estate investment trust (REIT) specializing in single-tenant net leased properties. Under a net lease, the tenant covers the costs of maintenance, insurance and property taxes, which works in favor of real estate income.

It has grown steadily since its founding in 1969 and now owns nearly 15,500 properties in the US and seven other countries. Most Americans have probably set foot in one of its buildings, as it is leased to most of the top retailers in the US. Home Depot, Krogerand O’Reilly Automotive are among its most important tenants.

Realty Income often bought properties and leased them back to former owners to help companies raise money, giving it additional sources of income. The strategy seems to have worked well, as it enjoys an occupancy rate of almost 99%.

However, investors probably know it best for its designation as the “monthly dividend company.” True to its name, it has paid shareholders a dividend every month since it began paying in 1994, increasing the dividend at least once a year since its inception.

Amid the stock market struggle, these increases have boosted the dividend yield. Consequently, the annual dividend, now at $3.16 per share, yields 5.1%. This is approximately four times S&P 500 average yield of just over 1.25%.

Real Estate Income Financial Statements

Furthermore, given its financials, investors probably don’t need to worry about Realty Income’s dividend stability. Its revenue of $2.6 billion for the two quarters of 2024 was up 32%. Most of that growth came from the acquisition of Spirit Realty, which added more than 2,000 properties to its portfolio.

Income from its normalized funds from operations (FFO) available to common shareholders, a measure of a REIT’s free cash flow, was $1.8 billion, or $2.12 per share. That’s more than enough to cover the $1.55 per share it paid out in dividends during that time.

One of the dark clouds holding back Realty Income stock may have become less of a factor with the Fed’s rate cut. Over the past year, the stock is up 25%, with most of that growth coming since July. This may mean that the stock will soon be ready to finally break the 2020 high.

A data by YCharts.

Additionally, when measured against normalized FFO, the stock is selling at a price-to-FFO ratio of around 15. This makes the stock cheap, especially given its continued dividend growth and upside potential actions.

It’s time to buy Realty Income stock

Investors looking for growth and income should consider Realty Income stock.

Of course, higher interest rates are almost always a headwind for REITs. However, the stock has managed to grow its portfolio and dividend despite higher rates. At a price-to-FFO ratio of 15, the stock is also reasonably priced.

Now that they have the added catalyst of lower interest rates, more investors may be interested in Realty Income. Therefore, investors will not only benefit from a growing income stream, but the company also has the potential to earn market returns, as investors should reap additional benefits from rising stock prices.