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real estate income (oh -0.32%) Real estate investment trusts (REITs) invested $9.5 billion last year.This figure does not include pending acquisitions of other REITs. spirit realty. This exceeded the 2022 total and exceeded guidance the REIT had raised several times.
The company took advantage of tough market conditions to make further investments last year, filling a gap as rivals retreated.This allows you to lock in a higher position real estate cap rate It’s a deal that increases its cash flow per share and gives it more funds to continue increasing its dividend (at the current share price, it has an attractive yield of 5.2%).
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Realty Income originally expected new investment to be only around $5 billion last year. This will be a significant decrease from 2022, when it invested $9 billion.of REIT They had hoped to be more conservative given the sharp rise in interest rates and expectations that they would continue to rise through 2023.
However, despite these headwinds from rising interest rates (borrowing costs increased, stock prices became heavier, stock prices rose) capital cost), Realty Income caused a takeover spree in 2023. The company ultimately secured a deal worth $9.5 billion, exceeding the final updated guidance figure of $9 billion. The company ended the year on a strong note, securing $2.7 billion in new investment in the final quarter.Achieved a stable diet Acquisition through sale-leaseback Complementing several large transactions (most notably the purchase of a $1.5 billion convenience store property from EG Group and a $950 million investment in Bellagio Las Vegas real estate assets).
Real estate income is not a transaction made to achieve a certain number. It remained disciplined. The cap rate for new investments secured in the fourth quarter was 7.6%, increasing the 2023 total to 7.1%. By driving higher cap rates, REITs increased investments to offset higher costs of capital and increase cash flow per share.
These aggressive acquisitions have allowed the REIT to continue increasing its monthly dividend. Last year, payments were increased five times by a total of 3.2%.
Possibility of a further breakthrough year
Realty Income is already preparing big deals for 2024. In October, it agreed to acquire fellow REIT Spirit Realty for $9.3 billion. The company hopes to complete the transaction early this year. The company recently disclosed that it has several shareholder lawsuits filed that could delay or derail the deal, which it believes are without merit.
The Spirit merger will have a huge impact. Realty Income estimates that this transaction will increase his adjusted funds under management by more than 2.5% (FFO) per share this year. This represents more than half of the company’s annual goal of increasing adjusted FFO by 4% to 5% annually.
The company estimates that by reinvesting the free cash flow it retains after paying dividends into new real estate investments, it can push its growth rate within its annual target. Following the Spirit acquisition, the company is expected to generate more than $800 million in surplus cash each year after dividends. Leverage could help fund more than $1 billion in new real estate acquisitions this year without raising additional equity capital.
However, with interest rates expected to decline slightly this year, REIT stocks are on the rise. Therefore, you need to be able to sell shares as needed to fund additional new investments when the opportunity arises. Given the company’s elite balance sheet, Realty Income could easily acquire billions of dollars in real estate this year in sale-leaseback deals or larger portfolio acquisitions. These transactions should allow him to increase the REIT’s cash flow and continue increasing its dividend. The company has increased its dividend 123 times (over 25 consecutive years) since going public in 1994, making it an elite group of dividend stocks.
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Acquisitions are a key driver of Realty Income’s growth strategy. The company trades to increase its cash flow per share, allowing it to steadily increase its dividend. The REIT had a great year in 2023 for him, and is already gearing up for an even bigger year in 2024 by agreeing to acquire Spirit Realty. This deal and future deals should allow the REIT to continue increasing its dividend. This makes it a great option for investors looking for a steadily increasing stream of passive income.
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