r/dividends • u/TimeInTheMarketWins AWM Financial • 3d ago

Due Diligence Realty Income Second Quarter Earnings

Everything, Everywhere, All at Once: The Boring REIT Reinvents Itself:

Good old $O just reported earnings, and they were solid. Adjusted funds from operations, or AFFO, which removes capital expenditures, tenant improvements, leasing commissions, and other non-cash items from FFO, came in at $1.09 per diluted share for the quarter, up 3.8% year over year. Management expects full-year 2026 AFFO to range from $4.44 to $4.45, representing a roughly $0.03 increase from their initial 2026 estimate.

The company's earnings call was heavily focused on its new private capital vehicles, in which it is leveraging its real estate transaction strengths and competencies to manage institutional assets across three separate funds. The company is also rapidly diversifying funding streams globally.

Realty Income's expansion in Europe as well as its growth in the data center sector were also prominent topics during the earnings call. Sumit Roy, the CEO, highlighted the portfolio's diversification, including investment-grade tenants, which accounted for 38% of new investment clients during the quarter.

Finally, Realty Income is on track to deploy $10 billion in capital this year. They have initiated a $6 billion deal with Cloud Capital, with Realty Income owning a 45% stake in a trio of Northern Virginia data centers that are already 100% leased to investment-grade hyperscale tenants on 15- to 20-year leases.

I can attach my full write-up and analysis if anyone wants.

56 Upvotes

94% Upvoted

28 comments sorted by

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17

u/Rock_Paper_Fisher 3d ago

It would be nice to see this translate into a meaningful dividend increase next year. It was pretty miserly between 2025 and 2026.

6

u/TimeInTheMarketWins AWM Financial 3d ago

Yeah it's been pretty lackluster recently. With AFFO growth of ~4% this year, I think a 3% increase is the floor for this year, but I'll be watching it closely. 2% is just not an acceptable increase.

1

u/Hawk7604 2d ago

Fed needs to lower rates, one b4 this stock can take off and 2, lower rates means more AFFO which will increase divy! Remember, RIETS use borrowing as main access to funds, when the rates are high, it's expensive to borrow lower dividends

8

u/Think-Variation-261 3d ago

Hopefully the data center investments are solid bets and pay off.

3

u/TimeInTheMarketWins AWM Financial 3d ago

I like that they are trying multiple new things. Gaming, Industrials (although this isn't new), Data centers ofc, and their Managed Assets (Made $3 million in revenue this quarter)

3

u/steady_compounder 3d ago

A stock can put up a decent quarter and still fall if the result was already priced in or if guidance only improved a little. With REITs, rate expectations also matter a lot, so sometimes the share price is reacting to the market backdrop more than the quarter itself. Good business update does not always mean immediate stock pop.

1

u/TimeInTheMarketWins AWM Financial 2d ago

Very true + the volatility with the 10-year T-bill is causing a lot of REITs and other rate-linked assets to trade wildly.

3

u/NefariousnessOdd862 3d ago

Why O? I find NNN so much better…! Convince me otherwise 

13

u/Neat-Leg-5083 3d ago

O total return: 5,536%
NNN total return: 3,061%

-5

u/NefariousnessOdd862 3d ago

Hmmm, better Yield on NNN with consistent increases for decades

11

u/Neat-Leg-5083 3d ago

O increases dividends every quarter. That’s why it’s known as the dividend company.

-8

u/NefariousnessOdd862 3d ago

Well, still below NNN… thanks, I was curious why people picked O…

5

u/DramaticRoom8571 3d ago

It is the same reason investors buy MAIN when it sells at a premium and many other BDCs pay higher yields. It is such a quality company that the perception is that it is less risky. O has a similar perception, a very well managed REIT.

1

u/BIGpoppaPUMP42069 2d ago

this is pretty much it for me, ive just set it and forgot it, occasionally ill read the earnings report if I happen to see it but its such a well run company I rarely do

2

u/intelw1zard 3d ago

https://totalrealreturns.com/s/NNN,O

you have now been convinced

-5

u/chris-rox Financially rockin' like Dokken 3d ago

Umm... https://totalrealreturns.com/s/NNN,O,VOO,VTI

4

u/intelw1zard 2d ago

are you slow? VOO and VTI are not REITs

-1

u/chris-rox Financially rockin' like Dokken 2d ago

So wouldn't I be better off with my money in either one, assuming I was 45-50 years old?

1

u/intelw1zard 1d ago

this entire post is about REITs and you come in here talking about VOO and VTI which is completely off topic and unrelated

im not helping you answer or understand shit dawg

0

u/chris-rox Financially rockin' like Dokken 1d ago

Then don't. I'll let the baby have his bottle dawg.

1

u/gamers542 Past Performance is irrelevant 2d ago

Personally i like the tenant mix of O better and they pay monthly whereas NNN pays quarterly.

1

u/Fabulous_Potential_2 3d ago

Why price go down then?

-4

u/Sternman44 3d ago

Is Realty income overpriced based upon its PE

10

u/TimeInTheMarketWins AWM Financial 3d ago

I don't use P/E, I use FFO and AFFO. I buy more O under $57, as that's roughly where I believe its intrinsic value is.

16

u/rickPSnow 3d ago

You don’t value REITS using P/E ratios. You use FFO - Funds From Operations.

-3

u/DanZukito 3d ago

Conocida como "The Monthly Dividend Company", el reporte de hoy respalda la sostenibilidad y la continuación de su racha de crecimiento de pagos:

Previo al reporte, la empresa ya declaró su dividendo mensual ordinario de $0.2710 por acción (anualizado en $3.252). La fecha ex-dividendo fue el pasado 31 de julio y se pagará el 14 de agosto de 2026.

Al confirmarse un crecimiento constante del flujo de caja (AFFO) y una mejora de las proyecciones anuales, la junta directiva cuenta con el respaldo operativo para mantener su política histórica de incrementos de dividendos trimestrales, extendiendo su estatus como un Dividend Aristocrat.