This Stock Delivers Reliable Returns Without the Volatility of the S&P 500

This Stock Delivers Reliable Returns Without the Volatility of the S&P 500

The company is built to produce steady income.

Do monthly dividends and positive earnings growth for several consecutive years sound like a good investment? In this segment of “The Rank” on Motley Fool Live , recorded on March 7 , Fool contributors Matt Frankel, Jason Hall, and Tyler Crowe take a look at Realty Income ( O 0.59% ), a REIT with a long track record of success. Video Player is loading. Play Video

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FullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button. Where to invest $1,000 right now Before you consider making any real estate investment, you’ll want to hear this.Our team of real estate experts and analysts at The Motley Fool just revealed what they believe are the top 5 best REITS under $49 for individual investors right now… and they’re giving the report away for free.Over the last 20 or so years, REITs have consistently outperformed the regular stock market. And with the recent release of our top 5 favorite REIT investments right now, we believe it’s an ideal time to get invested. Matt Frankel: They are a net lease REIT. What that means is they buy primarily freestanding properties that are leased to tenants using so-called net lease agreements. A net lease means that the tenant generally signs a long-term lease, say 10-15 years for the initial term. Annual rent increases built-in, these are called escalators, and the tenants agree to pay most of the variable costs of property ownership, specifically property taxes, building insurance, and most maintenance expenses.In other words, a net lease landlord has to get a tenant in place and they know what their income is going to be for the next 10 or 15 years. It’s a really steady income business model, and there’s a lot of upside potential because it’s backed by these underlying real estate assets that tend to increase in value over time as well.Real estate companies use a little bit of leverage, not a ton. It’s similar to buying a house with a mortgage is the concept behind it. Then they issue equity and things like that that grow over time. Realty Income started in 1969 with one Taco Bell [a part of Yum! Brands ( YUM 2.49% )]. They owned a Taco Bell building that Taco Bell operated in. Since that time they have built their portfolio. Look at some of these numbers and I’ll go through each real quick.Over 11,000 properties under long-term lease agreements in all 50 states, Puerto Rico, the United Kingdom, and Spain. They’re in 60 different industries, primarily different forms of retail. But I’ll get to that in a second why I think that’s still safe. Look on the left side of your screen. Remember, this stock’s historical beta was about 0.5 meaning it was about half as volatile as the S&P 500.Since it listed on the New York Stock Exchange in 1994, it’s generated an average annualized return of more than 15%. They have paid 619 consecutive monthly dividends, dating back to their early days in the late 60s, early 70s. Since listing, they’ve increased that dividend for 97 consecutive quarters. This company is built to produce steady income like clockwork.I just want to hit on a few points of why I think this is safe, and why I think it’s a great risk-reward ratio. For one, it’s generated positive earnings growth 25 out of 26 years it’s been a publicly traded company. I want to say it was 2008 was the only year it didn’t. It has a great top-notch credit rating, it’s really rare for a REIT to have grade A credit. Its beta is very low. It’s one of the largest REITs, and 94% of its rent comes from resilient types of properties.Think of discount stores, Costco ( COST 1.55% ) is a big tenant of theirs. Things like the major dollar stores are big tenants of theirs. Non-discretionary retail, things that people need, not that they want, CVS ( CVS -1.16% ) and Walgreens [a part of Walgreens […]

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