Realty Income: Buy, Sell, or Hold?

Shares of Realty Income (NYSE: O) are trading near 52-week highs, up roughly 30% from their 52-week lows in late 2023. The investment equation here isn't as attractive as it was, but is it still attractive enough for investors to buy the stock? Is it time to take profits and move on? Or should investors sit tight and hold this industry-leading net lease real estate investment trust (REIT)?

Sell Realty Income

If you bought Realty Income with the intent of riding a bounce in the stock, you might be sitting on sizable gains. Indeed, a 30% price increase in less than a year is a very big move, particularly for a REIT that's basically known for running a boring and consistent business. The stock remains around 25% below its pre-pandemic peak. And it is still around 20% below its highs in 2022. So there is still reason to believe there's more upside here.

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However, sticking around in the hope of a return to pre-pandemic stock prices could be a long slog. Part of the reason why Realty Income's stock has declined so much is related to the rise in interest rates following the pandemic. Rates remain elevated relative to pre-pandemic levels and don't seem likely to return to those historically low levels quickly. In other words, the "easy" money may have been made, suggesting that it could be time for investors with a short-term focus to move on.

O data by YCharts

Hold Realty Income

If you own Realty Income, there are two broad stories to consider. First, you bought it before the sell-off and are sitting on losses. Second, you bought it after the sell-off and are sitting on gains. There's a reason to hold in both scenarios.

The key is that nothing material has changed about Realty Income's basic investment approach or industry position. With a market cap of $50 billion, it remains the largest net lease REIT (net leases require tenants to pay most property-level operating costs). It is roughly four times larger than its next closest peer. That gives Realty Income key advantages with regard to accessing capital markets, competing for properties, and undertaking larger transactions.

The REIT's business, meanwhile, is still focused on following a safety-first approach. That includes having an investment grade rated balance sheet and a well-covered and steadily increasing dividend (the annual streak is up to 29 years). If you bought Realty Income with the idea of holding for the long term, selling now would probably be a mistake even if you are sitting on losses. And if you were brave enough to buy when the price was in the doldrums, the paper profit is just icing on the cake.

Buy Realty Income

From a big-picture perspective, the reason to buy Realty Income is basically the same as the reason to hold it. It remains a well-positioned industry leader in the net lease space. But, the key here is that the 5.2% dividend yield is still pretty attractive. The yield on the S&P 500 index is a paltry 1.2% or so, while the yield on the average REIT is about 3.9%. Realty Income is still offering a relatively generous income stream to dividend investors .

O Dividend Yield data by YCharts

And, while the yield is down from its recent peak of more than 6%, it remains near the high end of the stock's 10-year yield range. It is also above the stock's own 10-year average yield of roughly 4.5%. So the yield is attractive broadly speaking and also relative to Realty Income's own history. While not a screaming buy, it remains an appealing income stock.

Realty Income is still a solid pick

In fairness, Realty Income isn't as attractive an investment as it was just a few months ago. Short-term investors who rode the quick price advance here might want to sell it. However, if you are a long-term investor with an income focus, this REIT remains a solid stock to hold and is probably worth buying if you don't already own it.

Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy .