It’s like that saying from the movie Jaws, just when you think it’s safe to go in the water (key, ominous foreshadowing background music: dunt, dunt, dunt, dunt….) Since the beginning of August, every time Wall Street water seems to be calming, inviting and crystal clear, snap, suddenly blood is in the water with sharks ripping apart recent gains.
We had some success fending off predators last week with 3M Company (MMM), one of the highest yielding Dividend Aristocrats. So, we went back to apparently calmer waters of Dividend Aristocrats for this week’s COW (chart of the week).
Realty Income Corporation (O) is another Aristocrat with a current dividend yield above 5% as we type. O currently pays $2.98 per share for a 5.08% yield.
Realty Income is an S&P 500 company structured as a REIT. Its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term commercial lease agreements. To date, the company has declared 608 consecutive common stock monthly dividends throughout its 52-year operating history and increased the dividend 109 times since Realty Income’s public listing in 1994.
Nothing wrong with any of that, in our opinion. Along with an attractive dividend and history, O’s chart offers some upside hope. On Tuesday, shares of the REIT moved to the positive side of its declining trendline for the first time since the middle of August. In addition to its trend break, Realty Income experienced a bullish MACD crossover.
While not failproof, it’s been our experience that trend breaks are bullish for prices more often than not. At the very minimum, they help us determine exit points for short-term trading. In O’s case, we’d consider cutting losses if the stock closed below $55. Longer-term investors might consider a dollar-cost-averaging plan for the next year as a way to mitigate market fluctuations.
(Dollar cost averaging is investing equal dollar amounts on a schedule. For example, $1000 a month on the 15th for the next 12 months = a $12,000 total investment in 12 separate trades. Dollar cost averaging means you’ll buy more shares when the stock is lower and less shares when the price is higher. Thus, lowering your average price.)
With a Beta of 0.79, Realty Income Corporation (O) is considered less volatile than the S&P 500 (Beta of 1). O is appropriate for investors with an average risk tolerance and a time of at least one year.