Events of the past 45 days have been called by some a “buying stampede.” And within it we’ve seen 10 straight up days for the Dow Jones, an unprecedented streak since I’ve personally started investing six years ago. For value-minded and fundamental investors,this can be a frustrating time. After all, with indices hitting all new highs, bargains are increasingly difficult to find.
But I made a similar complaint in an entry on March 1, so we won’t go down that same road this time. Once again, I have three stocks which I believe are a good value and trade at a discount despite averages being at multi-year highs. The best thing about these three plays is that they are all “best of breed” among their peers.
Realty Income Corp (NYSE:O): The monthly dividend company
Realty Income Corp (NYSE:O) is a triple net-leasing Real Estate Investment Trust. By triple net I mean that tenants will pay property taxes, insurance and building maintenance. Realty Income acquires and owns commercial real estate, collects rent and distributes dividends monthly. They own more than 2,500 properties in 49 states spread to over 100 tenants in long-term lease agreements, and their market cap is now just under $8 billion.
It’s known as “the monthly dividend company,” and Realty Income Corp (NYSE:O) has lived up to that name for over 500 consecutive months, raised the dividend over 60 times and have never had to cut the size of its distribution. This includes 2009 when many other REITs were cutting dividends.
One of the reasons Realty Income Corp (NYSE:O) is so consistent is the long-term nature of its leases. The REIT has targeted retail tenants in non-discretionary markets with low price-points and services, which can’t be bought on the Internet. Management is very selective with whom they get into lease agreements with and Realty Income Corp (NYSE:O) has a good reputation among retail operators for being a fair and desirable acquirer of property.
As of Friday, March 22, Realty Income Corp (NYSE:O)’s dividend yield stands at 4.89%. The stock’s price is likely down due to a recent secondary offering to fund an accretive acquisition. Although the price-to-FFO is fairly high at 19.1, I believe the dividend yield represents a compelling value. From a technical standpoint, Realty has just bounced off its 50-day moving average.