Matt DiLallo, The Motley Fool
5 min read
Most dividend stocks pay you four times each year. The best ones will try to raise their payments annually. That lower frequency makes a monthly dividend payer that has raised its payment 137 times over the past three decades really stand out.
This outlier is Realty Income (NYSE:O). Known as The Monthly Dividend Company®, this real estate investment trust (REIT) is a great stock to buy before the end of November. Here’s why.
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Timing matters for the next dividend payment
Realty Income recently declared its latest monthly dividend payment. The REIT will pay $0.274 per share on Dec. 15th. That’s up 0.9% from the prior month’s level. It marked the company’s 137th raise since its 1994 listing on the NYSE, while extending its quarterly growth streak to 117 straight quarters. That’s over 32 consecutive years of dividend growth.
To receive that next payment, you need to be a shareholder of record as of Nov. 30. If you wait until Dec. 1 to buy shares, you wouldn’t receive your first monthly dividend payment until the new year.
A great value proposition right now
Getting in just to receive the next dividend payment isn’t the only reason to buy the stock soon. Realty Income currently trades at a very compelling valuation. Its stock price was recently around $60 per share, more than 10% below its 52-week high. At that price, Realty Income’s dividend yields 5.5% at its new dividend payment rate. That’s a compelling yield in today’s market.
The REIT currently expects to generate about $4.45 per share of adjusted funds from operations (AFFO) this year, easily covering its dividend ($3.288 per share). At its current share price, Realty Income trades at just 13.5x earnings. That’s very inexpensive for a high-quality REIT.
One reason Realty Income’s stock price has fallen is due to the recent uptick in interest rates. The 10-year Treasury is over 5% right now, up from around 4% before the war with Iran began earlier this year. The war has driven a resurgence in inflation, prompting the Federal Reserve to raise rates again.
The Fed’s next meeting is in early December. After pausing at its last meeting, the Fed will likely hike rates again next month, potentially by 50 basis points. That could signal to the market that it’s serious about bringing inflation down to its 2% target quickly, potentially sparking a relief rally in more rate-sensitive stocks, such as REITs.
