The end of the year is a time for reflection and an opportunity to look forward. It's natural for investors to already be thinking about the best stocks to buy for the coming year. Ideally, investors should be trying to identify stocks that will make winning investments in the long run.
But when stock being bought can affect returns, so considering the current also makes sense. One factor some investors may consider is how resilient an investment is to different economic conditions. Finding a stock that can weather the storm of a recession could be appealing to those worried that there could be a downturn in the coming year.
Let's take a look at a company that has positioned itself well for any possible macroeconomic outcome and see if now is the time to buy.
Realty Income (NYSE:O) pays its dividend every month. While this is not all that unique, it is something the company takes seriously. It has raised its dividend every year for the past 30 years. Paying this steadily growing dividend is important enough that Realty Income calls itself “The Monthly Dividend Company.”
Putting the company's dividend aside, Realty Income also has to pay out at least 90% of its earnings as a dividend because it is what is known as a real estate investment trust (REIT). This classification further confirms the reliability of the dividend payment to shareholders. The stock currently sports a dividend yield of 5.9%, which easily exceeds the dividend yield S&P 5001.3% yield
The Realty Income business owns and leases real estate to clients doing business in 90 different industries. Most of these lease agreements are triple leases, meaning that the clients – not Realty Income – take responsibility for things like taxes, insurance and maintenance.
Realty Income's strategy of leasing to so many different industries provides diversification for its real estate portfolio. If there is a downturn in one sector of the economy, it will not have too great an impact on the REIT because that sector would only be a small percentage of its portfolio.
The company allocates 73% of its portfolio to businesses such as non-discretionary, low-price, and service-oriented retail. Think food, convenience stores, drug stores, etc. In short, even when things get tough economically, Realty Income clients should be resilient. In fact, the company classifies around 90% of its real estate portfolio as “resistant to economic downturns and/or insulated from economic pressures.”