Don’t Expect Growth From Realty Income: O Stock Is Just for Dividends

Shares of Realty Income Corporation (NYSE:O) dropped 2% after the company reported first-quarter earnings after the bell on Wednesday. And I don’t expect the O stock price to bounce back any time soon. This is purely a dividend stock. Realty Income is part of the S&P 500 and a member the elite S&P High Yield Dividend Aristocrats group because it has paid out — and increased — its dividend in each of the last 20 years. It’s an impressive track record.

From the quarterly numbers posted, it appears to be business as usual for Realty Income — but that may be the problem. Year-to-date, O stock is down 1.5% while the S&P 500 is up 1.8%. Realty Income has paid four dividend payments and now posted two earnings reports, both of which on the surface appear to be strong. But the biggest issue with O stock is share dilution. In 2010, Realty Income’s balance sheet stated the company had 110 million outstanding shares. By the end of last year, that number had grown to 225 million. Yes, the share count doubled in four years. That is bad — and it will continue to get worse as times goes on. Furthermore, the share dilution will eventually hit a level that will put the dividend payment, and especially its growth, in jeopardy.

Source: InvestorPlace

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