The proportion of Property income (WKN: 899744) fell below EUR 70 at the beginning of the week. Is it sustainable or just a short dip? We will see. More crucial than the mere decision, however, is whether this is a favorable opportunity to buy again. To make it short: probably not cheap.
But let’s look at property income and the factors that ultimately determine it. It continues to be a large corporate REIT. 11,200 properties, moderate growth and a strong dividend form the basis.
Property income: Cheap enough? know smear!
Of course, that makes Realty Income a little cheaper. The property investment fund has a dividend of 4.25% at the current share price. The price-FFO ratio is also approaching the 17.5 mark again. However, I am convinced that we need to clean this up immediately.
With regard to the exchange rate, the euro and the dollar are in the special situation that we as German investors end up paying a surcharge with the euro. For US stocks, I currently expect a 10% premium in terms of valuations. That would put the dividend yield below 4%, while still keeping the price-to-FFO ratio below 20.
Still, Realty Income’s valuation metric wouldn’t be as cheap as it looks in US dollars. A first relevant insight for me. But the growth is real. Finally, the property investment fund most recently managed funds from operations with 15.8% on a normalized basis and 10.2% on an adjusted basis. These are solid gains that bode well for dividend growth later this year.
Realty Income is therefore not a clear value grab, but that could also be due to the quality of the REIT and the solid dividend. However, with two or three years of additional growth, the REIT can grow back to its valuation. Crucially, same-store revenues also grow at least in the low- to mid-single-digit percentage range to at least slightly offset inflation.
The monthly dividend company property income has lost some feathers. But for me, the share of the well-known REIT is currently not a clear buy or steal, as they say, even at below 70 euros. You still pay a higher price for quality. Therefore, the top share still ends up on my watch list.
Especially explosive at the moment: we should pay at least a little attention to the exchange rates, there is a special situation between the euro and the US dollar. This makes the purchase more expensive for us. At least if the euro and US dollar eventually tend towards their initial relationship of between US$1.10 and US$1.15.
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Vincent owns shares in Realty Income. The Motley Fool does not own any of the stocks listed.