Is the Stock Market Going to Crash? Who Knows? That’s Why I Own This High-Yield Dividend Stock.
It has been a historic month. A gunman nearly assassinated a former president, while the current commander in chief stunningly revealed that he will not seek re-election.
These two events add to the country’s growing economic uncertainty, already driven by persistently high inflation and interest rates, and heighten concerns about a potential stock market crash (which earlier this week saw its worst day in years).
I have no idea if there will be a crash or not. However, I have taken steps to prepare in case it does happen. I have cash on the sidelines and several defensive stocks in my portfolio to cushion the blow, such as Real estate income (NYSE: O). Here’s why I suspect that it great Investing during uncertain times.
Back to solid base
Realty Income lives up to its name. The real estate investment trust (Real Estate Investment Fund) It pays very consistent dividends. It recently announced its 649th consecutive dividend. Monthly return.
The company has raised that amount 126 times since going public in 1994 (30 consecutive years), including over the past 107 consecutive quarters. Its earnings have grown at a compound annual rate of 4.3% over that period.
The current return of the REIT is 5.5%, which is several times higher than the annual return. S&P 500 Index 1.3%. This high return provides investors with Very solid Basic return.
The dividend payout is based on very solid fundamentals. The company generates very stable cash flows supported by long term returns. Net RentsAt the same time, it has a conservative dividend payout ratio for a REIT: less than 75% of its adjusted funds from operations (Fofo).
to the top All of this, and it is one of only eight REITs in the S&P 500 with two investment grade REITs. Bond Ratings Rating A3/A- or better. The company’s strong financial position helps protect it during market downturns.
low volatility
Realty Income’s combination of stable earnings and strong dividends makes it among the least volatile stocks in the S&P 500:
Its beta is 0.5, meaning it is about half as volatile as the broader market. It also has an excellent track record of growing during the most challenging economies. Realty Income has posted positive earnings growth in 27 of the last 28 years (the only outlier was during the financial crisis). It was one of the few REITs to post positive earnings and earnings growth during the 2020 pandemic.
The company is in strong position The company is looking to continue serving the next recession. About 90% of its rents come from tenants in industries that are resilient to recessions or insulated from the pressures of e-commerce, such as grocery stores, convenience stores and dollar stores.
Clear growth
The REIT should have no problem continuing to grow during the next market crash. Built-in rental drivers such as rental elevators, along with acquisitions that it can finance internally using cash retained after paying dividends, should add about 2% to net operating income per share annually.
At the same time, it has great ability to manage the balance sheet. Financing Acquisitions Externally. It is estimated that each $1 billion of externally financed investments will add about 0.5% to net operating income per share. every year. The company conservatively expects its operating earnings per share to grow 4% to 5% annually when including its internal and external drivers.
Realty Income has already delivered solid underlying growth this year. It completed the $9.3 billion acquisition of Spirit Realty earlier this year, and that deal alone is expected to add more than 2.5% to its net operating earnings per share. in 2024. Add to that the rental growth and its goal to complete $3 billion in additional acquisitions this year, and the fund is on track to grow net operating income per share by more than 4% despite interest rate headwinds.
Wallet stabilizer
Realty Income stock is not immune to market crashes, but its low volatility suggests it won’t fall as sharply as the broader market during a crash. At the same time, it offers an attractive underlying dividend yield that is expected to continue rising.
These factors will enable it to provide stability during future market storms, This is why I hold a growing position in this high yield REIT in my portfolio.
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Matt Delallo The Motley Fool has positions in and recommends Realty Income. The Motley Fool has positions in and recommends Realty Income. Disclosure Policy.
Will the stock market crash? Who knows? That’s why I own this high-yield stock. Originally posted by The Motley Fool
