Sunday, November 24, 2013

Going Where Most Investors Fear to Tread: O and ARCP.

This past week I stepped to buy more shares of two monthly dividend paying stocks that were already in the portfolio-- Realty Income and American Realty Capital Properties, two of the largest triple-net REITS in the country. I bought 20 shares of O at an average price of $38.75 and 40 shares of ARCP for $12.95.

In a market that is definitely frothy, with the normal dividend stocks that most dividend investors like being more than fully valued, REITS have been getting pounded, with many in negative territory for the year. Only time will tell if these are bargain prices, or if the stocks will go lower, but to the long term dividend investor it doesn't really matter. And as a dividend investor, you've got to love the accelerated compounding of monthly dividends.

Realty Income is considered a blue chip REIT with a BBB+ credit rating that has a consistent history of slowly raising it's dividend year after year. Don't expect any large moves from O, but do expect a slow, steady increase in dividends and share price over the years. O currently yields approximately 5.6%, and after its mega-acquisition of ARCT has 3,866 properties in 49 states and Puerto Rico. it's top 5 tenants are Fed-Ex, Walgreens, Family Dollar Stores, LA Fitness, and AMC Theaters, with no single tenant accounting for more than 5.1% of total rent. It's occupancy rates have never fallen below 96%. 2014 FFO is forecast to be between $2.53 to $2.58.

ARCP does not have a long history of consistency like Realty Income. ARCP went public two years ago with a portfolio of 63 properties and just two tenants. ARCP has been on an acquisition binge since going public, with it's most recent merger with Cap-lease (LSE) just consummated. The proposed merger with Cole Real Estate Investments (COLE) will create the largest net-lease REIT in the US with an enterprise value of $21.5B. Post-merger, ARCP is forecasting a dividend of $1 per share. FFO earnings guidance for 2014 is in the $1.13 to $1.19 range. Nick Schorsch's aggressive acquisition strategy may pay off for investors in the long run.

If lower prices present themselves on either of these stocks, I'll use the opportunity to nibble away.


  1. Hi BOL,
    I need to dig into Realty Income more before I invest, but I appreciate you sharing the idea. Also, thanks for posting the inspirational video yesterday. Most all of us have a TON to be thankful for. Keep the posts coming

  2. Bryan,

    Thanks for reading. Maybe we'll both get a chance to pick up some Realty Income at lower prices.