The end of the year is a time for reflection and an opportunity to look ahead. It’s natural for investors to think ahead about the best stocks to buy for the coming year. Ideally, investors should try to identify stocks that will be winning investments over the long term.
but when A stock purchase can affect returns, so it’s also wise to consider the here and now. One factor some investors may consider is how resilient an investment is to different economic conditions. Finding a stock that can weather the storm of a recession can be attractive to those who worry that a downturn could occur in the coming year.
Let’s take a look at a company that has positioned itself well for any potential macroeconomic fallout and see if now is the time to buy.
Realty income (NYSE: O ) Pays its dividend every month. While this isn’t all that unique, it’s something the company takes very seriously. It has increased its dividend every year for the past 30 years. Paying this ever-growing dividend is important enough that Realty Income calls itself a “monthly dividend company.”
Aside from the company’s preference for its dividend, Realty Income also has to pay out at least 90% of its earnings as dividends because it is called a real estate investment trust (REIT). This classification further strengthens the reliability of dividend payment to shareholders. The stock currently sports a dividend yield of 5.9%, easily outperforming it S&P 500yield of 1.3%
Realty Income’s business owns and leases real estate to clients in 90 different industries. Most of these lease agreements are triple-net leases, meaning it’s the customer — not Realty Income — who takes responsibility for things like taxes, insurance, and maintenance.
Realty Income’s strategy of leasing to many different industries provides diversification to its real estate portfolio. If there is a downturn in one sector of the economy, it will have no external impact on the REIT as that sector will only be a small percentage of its portfolio.
The company allocates 73% of its portfolio to businesses such as non-discretionary, low-price retailers, and service-oriented retail. Think groceries, convenience stores, drug stores, etc. In short, even when things get tough financially, Realty Income clients must be resilient. In fact, the company classifies about 90% of its real estate portfolio as “resilient to economic downturns and/or insulated from economic stress.”
