Income from real estate (O -0.75%) built its business to pay dividends. A real estate investment trust (REIT) owns properties that produce steady rental income. This gives it cash to pay its attractive 5.8% monthly dividend.
of REIT has increased that payout 123 times since it went public 30 years ago. She should be able to continue growing it in the future. Driving this view is his ability to continue acquiring income-producing properties. This ability to pay a stable and growing monthly dividend making it a great place to invest $100 right now. Investors can buy about two shares of a REIT that should produce a steadily growing stream of monthly dividend income.
Acquisition of more income
Realty Income recently disclosed its latest acquisition. The REIT is acquiring a portfolio of properties in Europe from Decathlon SE, one of the world’s top sports companies and sporting goods retailers. Realty Income is buying 82 retail properties from Decathlon SE into one sale-leaseback transaction worth 527 million euros ($578 million). It is the company’s first pan-European transaction, with properties in Germany, France, Spain, Italy and Portugal.
These properties will supply Real Estate Income with additional rental income to support its growing dividend. Meanwhile, the acquisition increases the company’s diversification by adding a new tenant with a strong operating history and financial position. The deal also boosts the company’s European expansion by adding several new countries. Prior to the acquisition, Realty Income’s European portfolio included 354 properties across the UK, Spain, Italy and Ireland. The company will now have invested over $9.5 billion in building its European real estate portfolio since entering the continent in 2019.
Realty Income’s initial sale-leaseback transaction with Decathlon could be the first of many between the two companies. “We hope this is the first step in a long and mutually beneficial global relationship between Decathlon and Real Estate Income,” said Neil Abraham, President of Realty Income International, in the press release announcing the deal. Decathlon currently operates 1,751 stores in more than 70 territories worldwide, including 27 in Europe, 14 in Asia and four in Latin America. The real estate proceeds may acquire additional properties from Decathlon in future sale-leaseback transactions, further expanding its international operations. Future deals would also provide additional rental income to support dividend growth.
Continuing to grow its dividend through deals
The Decathlon deal is the latest in a string of value-enhancing investments by the REIT in recent months. It started 2024 on a strong note by closing its $9.3 billion acquisition of REIT Spirit Realty. The company expects the merger to add over 2.5% to its adjusted funds from operations (FFO) per share this year. That puts it more than halfway to its annual goal of growing its adjusted FFO by 4% to 5% annually.
Revenue Realty’s focus in recent years has been on increasing its scale through consolidation deals such as the Spirit Realty merger and expanding its portfolio into new growth verticals (property types, investment platforms and geographies ). For example, in addition to the deeper expansion in Europe, the income from Realty has made investments in the gaming sector (Encore Boston and The Bellagio Las Vegas), credit investments (preferred equity investment in Bellagio Las Vegas), and data centers ($200 million joint development venture with major data center REIT Digital Realty). These investments will increase its adjusted FFO in the near term, providing it with new growth platforms to drive future cash flow and dividend growth.
Build real estate income brick by brick
Real estate income is a great way to generate passive income from real estate. With its stock price recently around $50 per share, you can buy a few shares for around $100. They will supply you with an attractive and growing income stream. With a yield of nearly 6% and annual adjusted FFO per share growth target of 4% to 5%, real estate income could generate double-digit annual total returns going forward (enough to double your money every seven years). This makes it a great stock to buy whenever you have around $100 to invest.
Matthew DiLallo has positions in Digital Realty Trust and Wealth Income. The Motley Fool has positions and recommends digital real estate trust and real estate income. The Motley Fool has a disclosure policy.