Furthermore, Realty Income's tenants sign long-term net leases, meaning that the tenant is responsible for variable costs such as taxes, insurance, and building maintenance. Thanks to the nature of these businesses, tenant retention isn't a big problem, and these factors have combined to produce a 98.3% occupancy rate.
Projected growth in 2016
Realty Income projects that its funds from operations (FFO) per share will fall in the range of $2.82 to $2.89 for 2016. (FFO is the "earnings" of the REIT world. If you'd like more information on FFO and other REIT metrics, check out this slideshow .) At the midpoint, this represents a 4% increase over 2015's projected full-year FFO, which itself represents an increase of about 6.4% over 2014's results.
Steady growth in FFO per share has allowed Realty Income to increase its dividend at an average annual rate of 4.6% since its 1994 IPO.
While the dividend has grown at an impressive pace, the payout is only part of the Realty Income investment thesis. Because property values tend to increase over time, this stock's combination of growth and income has produced a phenomenal 16.6% annualized total return since the IPO. To put this kind of sustained performance in perspective, a $10,000 investment in Realty Income's IPO would be worth more than $250,000 today, 21 years later.
There's more than one dividend raise coming in 2016
Realty Income is unusual in that it pays dividends on a monthly basis and increases its payout each quarter. Shareholders should expect not one, but four dividend increases in 2016, combining for an increase in the 3% to 5% range if the company's history and FFO projections are any indicator.
Stocks that combine consistent dividend growth with long-term upside potential are the Holy Grail of long-term investing, and it's tough to find one that does it better than Realty Income. An investment in Realty Income has risks , just as any other stock does, but I see no reason whatsoever to think that the company's outstanding streak of dividend increases will be in jeopardy anytime soon.
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The article Will Realty Income Corporation Raise Its Dividend in 2016? originally appeared on Fool.com.
Matthew Frankel owns shares of Realty Income.. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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