Valuation-wise, Realty Income (NYSE:O) is priced reasonably, but I would not yet call it cheap. This is one of those cases where we’re getting an excellent company at a reasonable price; exactly the type of investment that long-term, income-minded investors are looking for.
Realty Income has averaged 17.5 times funds from operations over the past ten years. Even with shares at their current selloff, the stock is still expensive. The stock now trades at 18.9 times earnings, which is an 8% premium to its average valuation. ‘
Despite the discount, given the stock’s performance over the last 18 months, we believe this level of support is the cheapest Realty Income is going to get. Therefore, now is a good time for investors to pull the trigger.
Long-term treasury bonds have broken below support and are reaching lower lows. If this trend continues, REITs will continue to underperform.
While bonds themselves are still at high levels historically, this has put a number of REITs in the bargain bin, including Realty Income Trust. The contrarian investor will look through that bargain bin to find the high-quality companies on sale. Yielding 4.8%, it is time to buy!
We want you to join our community
Benefits of signing up for a FREE membership now:
-No more costly delays in waiting for material
-Dozens of publications per week, including news coverage, earnings commentary, analysis, politics, and more
-Access to special guest contributions, including from WSJ, CNBC, and prolific SA authors
–Ability to comment on articles
–Access to our weekly newsletter
-Publish your own opinion/analysis
Thank you for your readership, and for your loyalty.