Since Realty Income is a REIT, we'll look at funds from operations (FFO), which is the figure REITs use to measure their cash flow. Realty Income's FFO has been on a steady march higher. You can see FFO has been rising... and is expected to jump again next year. And even though the company has been consistently raising its dividend, FFO has more than kept up with the rising payouts. This year, Realty Income is forecast to pay shareholders $2.2 billion, which is 85% of its FFO. Next year, that figure is projected to fall to 70%. That means for every dollar of cash flow the company generates, it will pay out an estimated $0.70 in dividends. A couple of weeks ago, I asked you to decide how you would grade Illinois Tool Works' (NYSE: ITW) dividend safety before you revealed my grade. You sent in some nice responses, so let's keep it going this week... How safe do you consider Realty Income's dividend? Are you comfortable with a 70% payout ratio? Does anything concern you about the company? Let me know in the comments section on the next page, and then scroll up to reveal my grade. (And again... no cheating!) |
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