The Monthly Dividend King: Is Realty Income (O) a Buy Below $60?
The "Bond Proxy" is on sale. With the 10-Year Treasury stuck at 4.2%, Wall Street has punished Realty Income. But a look at their new "Capital Recycling" strategy suggests the market is pricing in a crisis that isn't coming.
🏢 The Thesis in 30 Seconds
- ✓ The Valuation Gap: Trading at ~13.8x AFFO, Realty Income is priced 25% below its historical average. The market expects "Dead Money," but the cash flow says otherwise.
- ✓ The "Debt Wall" Defense: Critics fear the 2026 debt maturities. They missed the fact that O already pre-funded this with a brilliant £900M Sterling term loan and Convertible Notes.
- ✓ The Verdict: We are issuing a BUY rating under $60, with a "Screaming Buy" target at $55.
1. The Math: Why $60 is the Magic Number
For the last decade, investors happily paid 18x-20x funds from operations (AFFO) for Realty Income's stability. Today, you can buy that same stability for less than 14x.
The market is treating O like a bond. When rates go up, bond prices go down. But Realty Income isn't a bond—it grows.
*Based on 2026 Estimated AFFO of $4.40/share.
2. Busting the "Debt Wall" Myth
The biggest argument against REITs right now is the "Maturity Wall." Billions of dollars of cheap debt from 2020 are coming due, and refinancing at 5% will crush earnings.
That is true for small REITs. It is NOT true for Realty Income.
The "Fortress" Advantage
Realty Income is one of the few REITs with an A- Credit Rating. While others scramble for cash, O just executed a masterclass in corporate finance:
- The Convertible Swap: They issued $862M in notes at just 3.5% interest. By using a convertible structure, they saved ~180 basis points compared to regular debt.
- The European Arbitrage: They borrowed £900M in the UK at lower rates to fund growth abroad, bypassing the expensive US Treasury market.
Note: This A- rated balance sheet is exactly why O scores so highly on our Almanac Safety Score.
3. The Power of "Boring" (2006-2026)
Valuation matters, but time matters more. We ran a historical simulation to see what happens when you buy a "boring" 5% yielder and let it snowball for 20 years.
The $10k Experiment
If you bought $10,000 of Realty Income in Jan 2006 (just before the 2008 crash) and reinvested every dividend:
"In 2026, you are receiving 56% of your original investment back in cash... every single year."
Yield on Cost: 57%
4. Our Investment Verdict
Realty Income is a cornerstone of our SWAN (Sleep Well At Night) Portfolio. It won't double overnight like an AI stock, but it provides the reliable cash flow needed to fund your life.
| Price Target | Est. Yield | Action |
|---|---|---|
| $60.00 - $62.00 | ~5.3% | Accumulate (Starter Position) |
| $55.00 - $58.00 | ~5.6%+ | STRONG BUY |
Catalyst to Watch: Q4 Earnings in late February. If guidance for 2026 comes in strong ($4.40+), the stock likely won't stay under $60 for long.
Disclaimer: This analysis is for educational purposes only. The author is long O. Past performance (like the 2006-2026 snowball) does not guarantee future results.