These Dividend Stocks Want a $13 Trillion Market. 2023


Real estate is essential to the operations of most businesses. Companies require a physical site to house their corporate offices and key production processes, as well as to service their retail consumers.

Despite the fact that real estate is sometimes mission-critical for a business, many consider ownership of these properties to be optional. Companies can increase their financial flexibility by releasing the cash attached to their real estate through sale-leaseback arrangements with investors. This allows real estate investment trusts (REITs) to continuously buy these properties, expanding their portfolios, rental income, and dividends.

There are around $13 trillion worth of owner-occupied properties in North America and Europe. They are particularly suited for sale-leaseback transactions, as REITs are primarily focused on holding single-tenant net lease properties. Realty Income (O 2.30%), National Retail Properties (NNN 1.00%), and W. P. Carey (WPC 1.40%) are three leaders in this industry. These REITs have a considerable amount of time to continue expanding their portfolios and payouts.

Realty Income is the industry leader in net lease real estate.

Nonetheless, the company’s commercial potential remains mostly untapped. It is estimated that there are around $4 trillion in commercial real estate in the United States and $9 trillion in Europe that are eligible for the net lease arrangement.

Presently, publicly listed REITs possess about $100 billion in commercial real estate in the United States and $6 billion in Europe. This creates an enormous market potential for Realty Income and its competitors.

Due to the size of the industry, Realty Income concentrates on acquiring corporate-owned real estate from major corporations. This is a substantial opportunity.

As this slide demonstrates, there is an opportunity to purchase real estate from huge firms in the United States and Europe for more than $2 trillion. Realty Income is best positioned to capitalize on this opportunity since its size allows it to complete larger transactions.

For instance, the business recently bought 415 single-tenant convenience shops in the United States from EG Group in a $1.5 billion transaction. Such large transactions are typically more accretive than smaller ones.

The company’s capacity to continue making acquisitions should enable it to continue increasing its dividend yield of 5%. Since going public in 1994, Realty Income has multiplied its dividend distribution by more than one hundred.

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