O - Realty Income: Compounding The 5.97% Yield Into A Great Investment
2024-04-15 09:00:00 ET
Summary
- Economic data for March came in higher than expected, causing concerns about the Fed's restrictive stance and putting pressure on REITs.
- Realty Income shares have declined, presenting a buying opportunity for long-term income investors.
- Risks to the investment thesis include a higher for longer rate environment and potential financial stress for tenants, but Realty Income has a strong track record and favorable valuation compared to peers.
This was not a good week for economic data as CPI came in hot for the month of March at 3.5%, which was an increase of 0.3% MoM and 0.1% above the consensus estimate. To make matters worse, The University of Michigan consumer sentiment fell to 77.9 points, which was a decline of 1.5 points MoM. This pushed bond yields to their highest point for 2024 as the 2-year reached 4.96%. Shares of Realty Income ( O ) took a dive, as they fell drastically after CPI was announced, and finished the week down -2.6%. Now we have increased talks about how long the Fed will remain restrictive, and pressure is mounting for REITs among other sectors. While everyone is anxiously waiting for what Fed Chair Powell says at the upcoming FOMC conference on May 1 st , I am adding to my position in Realty Income while others are panicking. I don't want to own commercial or residential real estate as an investment directly, but I love buying high-quality REITs and reinvesting the dividends. I have a long-term time horizon, and I think investors are getting another opportunity to own Realty Income close to its 52-week lows. If Realty Income continues to slide, I will just continue to buy, and I believe this is one of the best opportunities for long-term income investors to consider....
Realty Income: Compounding The 5.97% Yield Into A Great Investment