A Textbook Example Of A Dividend Machine
- I am going to provide you with a textbook example of a “dividend machine” and one of the most powerful “sleep well at night” investments in the REIT sector.
- Realty Income is viewed as a bond-like REIT, the company does generate very stable and predictable dividend growth.
- The shares have underperformed year to date, due in large part to interest rate fears.
As many of you know, in my early days and before I became a dedicated REIT writer, I was a real estate developer. One of my first clients was Advance Auto Parts (NYSE:AAP), and I scouted for the southeastern U.S. looking for outparcels to construct stores for the auto parts chain.
I suppose my fixation to the net lease sector was rooted in the simplicity of the “sleep well at night” income that net lease properties generate. For over a decade, I began to construct a portfolio of properties leased to companies such as CVS Health Corp., Eckerd Drug (now Rite Aid), Blockbuster Video, Econo Lube n’ Tune, Outback, KFC, Red Lobster and Barnes & Noble.
Many of the companies on the list are no longer in business, and one of the many lessons learned over the years – as a developer and analyst – is to maintain adequate diversification. All businesses are cyclical, and as an investor for over 25 years, I have gained valuable insight into the concept of managing risk.
Howard Marks wrote, “Investing is a matter of preparing for the financial future. It’s simple to define the task: we assemble portfolios today that we hope will benefit from the events that unfold in the years ahead.”
I just began reading Marks’ new book, Mastering The Market Cycle, and I can’t wait to finish reading it on my four-hour bus ride to Ithaca tomorrow, where I am lecturing at Cornell. He explains in the book, “Calibrating one’s portfolio is what this book is mostly about.”
That’s a great lead into my article today, and I can assure you, I am not writing about my success as a net lease developer. Believe me, I have had my share of winners and losers.
Instead, I am going to provide you with a textbook example (fitting for my Cornell lecture) of a “dividend machine,” a company that has successfully calibrated its portfolio for over two decades that has resulted in one of the most powerful “sleep well at night” investments in the REIT sector.
(Source: Rhino Real Estate Advisors)