Realty Income Corporation (NYSE:O) is one of the stocks Jim Cramer recently shed light on. Cramer made some optimistic comments around the stock, as he remarked:
“Finally, we’ve got a real estate investment trust, Realty Income… with its 5.7% yield… Of course, Realty Income is best known for paying its dividend monthly rather than quarterly. By the way, they’ve also raised that dividend four separate times this year alone. Now, the stock hasn’t exactly been on fire lately, it’s up just over 6% for the year, though the total return is closer to 12%, not far behind the S&P 500… Look, when Wall Street started worrying about corporate credit last month, some investors just dumped Realty Income because they were worried about its tenant base.
You know what, I’m more sanguine. First, Realty Income’s occupancy rate stood at 98.7% at the end of the third quarter, and the company had a rent recapture rate of 103.5% across almost 300 leases signed in the quarter. This is clearly not a landlord struggling to find paying tenants. Plus, most of their tenants are grocery stores or convenience stores or dollar stores, or home improvement stores. Alright, you can quibble about the home improvement business… But the other three groups sell necessities. They’ll do just fine, even in an economy where many consumers are struggling.
And look, no single tenant accounts for more than 3.3% of Realty Income’s rent base, so even if they lose a couple, it’s not a big deal. Even during the global financial crisis, their annual occupancy rate never dipped below 96.6%. If that’s the worst-case scenario, I’d say, well, we’ve got nothing to worry about here. This is a sleep at night stock that pays you a nearly 6% yield in monthly installments. I think the stock’s recent pullback is, yes, a buying opportunity.”
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Realty Income Corporation (NYSE:O) provides real estate capital to major companies and manages a large portfolio of commercial properties.
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Disclosure: None. This article is originally published at Insider Monkey.
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