SRC - Realty Income: Spirit Realty Capital Deal Adds To Valuation Headwinds

2024-02-03 09:43:45 ET

Summary

• Realty Income's merger with Spirit Realty Capital adds a layer of risk to the company's credit profile.
• The stock has been highly correlated with the bond market, with the current dividend yield spread implying shares are overvalued.
• Uncertainty regarding the direction of interest rates alongside ongoing macro concerns will likely keep shares volatile.

Realty Income Corp (O) has frustrated investors over the last several years with a poor stock price performance amid a volatile macro backdrop. Beyond the historic pandemic-era disruptions, the environment of climbing interest rates since 2022 has represented a major headwind.

We last covered O way back in 2018 with an article that took a bearish view citing our perception of a stretched valuation at the time. For what it's worth, shares are technically down over the period, but it's clear a lot has changed....

For further details see: