Realty Income (WKN: 899744) continues to be an interesting real estate investment trust, with the monthly dividend in particular looking very enticing. Foolish investors should still look at the overall rating. After all, there is only a fraction of the annual dividend on a monthly basis.
In any case, the company-oriented quality behind the Real Estate Investment Trust is much more decisive. I recently read that 43% of tenants have an investment grade rating. But what does this mean for an investment thesis?
Realty Income: 43% of rental income with this rating
The previous designation was actually still slightly incorrect. As the US portal MoneyWise recently reported, the REIT says that 43% of its rental income comes from investment-rate tenants. This is another clear distinction. After all, not every tenant has an equal share in the success, but based on the rental sum we can make an overall statement on the importance.
An investment grade rating means that the underlying company is considered relatively safe by rating agencies. Unlike non-investment grade ratings or even more speculative companies. When we read this distinction, some investors would probably have thought: the proportion of “safer” rents could have been estimated higher. In this respect, Realty Income comes as a slight surprise.
However, we must not forget that there are other security mechanisms at Realty Income. For example, the very diversified portfolio now has 11,700 units. This means: Even if individual tenants should drop out at short notice, the breadth and depth of the portfolio is good protection that ensures a high proportion of rental income and funds from operations.
Nonetheless, an interesting figure!
Still, the 43% that MoneyWise unearthed is a surprise to me, too. Not that my investment thesis is under scrutiny. But it shows that there are also certain individual risks. At the very least, not every tenant has an investment-grade rating. Not even every second.
Of course, it is interesting to see whether every tenant of the US REIT is rated at all. Of course, this can also change the situation. Still, I’m not worried. The breadth of the portfolio and also the history show that the management as a whole knows what it is doing. And has built a portfolio that has ensured quality and operational stability. Even if in the course of the history of real estate investment trusts it has sometimes become more uncertain.
The item 43% of Realty Income’s tenants are investment grade: what does that mean? appeared first on The Motley Fool Deutschland.
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Vincent owns shares of Realty Income. The Motley Fool does not own any of the stocks mentioned.
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