1 Wall Street Analyst Thinks Realty Income Stock Is Going to $59. Is It a Buy?

Mizuho analyst Vikram Malhotra revisited his rating on Realty Income (NYSE: O) last week, maintaining a buy rating on the stock and boosting the retail real estate investment trust (REIT)'s price target from $56 to $59 per share.

Many investors have steered away from REIT stocks in recent months. That makes sense on the surface as high dividend yields have competition from similarly high yields offered by online savings accounts, certificates of deposit, and bonds. Some REIT stocks have also suffered over concerns with commercial real estate. But the best times to buy stocks can be when sentiment is negative and stocks are down.

REITs can be growth stories, too

Some investors have already realized there are compelling reasons to buy Realty Income stock. Shares have recovered from 2024 lows over the last month. But Mizuho analysts think there's more room to rise from Realty's recent share price of about $55. Part of the reason for that is the subsector in which Realty Income operates.

Triple net lease REITs like Realty Income offer protection by holding tenants responsible for costs beyond the rent, including taxes, insurance, and maintenance. Realty has also focused on growth by adding geographic and property diversification with the acquisition of Spirit Realty Capital, which closed earlier this year. It also recently formed a joint venture with Digital Realty to move into the data center sector. And last year the REIT announced its first investment in a large casino property in Las Vegas.

The company's financials remain strong as it said adjusted funds from operations per share beat expectations and increased year over year when it announced first-quarter earnings on May 6. That should allow The Monthly Dividend Company,as it is known, to continue to pay and increase those dividends. And investors should flock to dividend stocks like Realty Income if the future direction for interest rates is lower, as the Federal Reserve has indicated. That makes now the time to add it to a portfolio.

Should you invest $1,000 in Realty Income right now?

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Howard Smith has positions in Realty Income. The Motley Fool has positions in and recommends Digital Realty Trust and Realty Income. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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