This Robinhood Stock Has a Trailing 5% Dividend Yield -- Is It Too Good to Be True?

Investors are close to beryllium leery of stocks with precocious dividend yields. Although specified returns look charismatic connected the surface, investors person to retrieve that dividend stocks that are not existent property concern trusts (REITs) tin set dividend payments astatine immoderate time. Moreover, REITs person the aforesaid state arsenic agelong arsenic they wage retired astatine slightest 90% of their nett income successful dividends.

This information whitethorn permission investors wondering what to bash astir a REIT called Realty Income (NYSE: O), a fashionable banal connected the Robinhood Markets platform. Known for paying a monthly dividend, its 5% dividend output is much than quadruple the S&P 500 average of 1.2%. Does that precocious instrumentality marque the payout excessively bully to beryllium true? Let's instrumentality a person look.

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Realty Income owns much than 15,500 single-tenant, net-leased properties. Under the presumption of these contracts, the tenant pays for insurance, spot taxes, and maintenance, ensuring a dependable income for the landlord.

Furthermore, occupancy is conscionable nether 99%, meaning the institution is ever looking to get oregon make further properties. Also, since its tenant database includes companies similar Home Depot, Dollar General, and Tractor Supply, it boasts a dependable lawsuit base.

That spot portfolio funds a $3.24 per stock yearly dividend, and its monthly payout has risen astatine slightest erstwhile per twelvemonth since its inception successful 1994. That streak sets an anticipation of periodic dividend hikes, and it could undermine assurance successful the banal if its payout did not emergence astatine slightest 1 clip per year.

For that reason, Realty Income is improbable to slash its dividend unless it cannot spend to prolong it. Fortunately, dividend affordability does not look to beryllium an contented for this company.

In the 3rd 4th of 2025, it earned $4.20 per stock successful funds from operations income, a measurement of a REIT's escaped currency flow. That currency allows Realty Income to screen the $3.24 per stock successful dividends and leaves immoderate currency disposable for different purposes.

Investors should besides enactment that little banal prices boost dividend yields. Hence, the information that Realty Income banal trades astatine a discount of implicit 20% from the all-time precocious has contributed to the higher dividend returns.

Moreover, the Fed has chopped involvement rates successful caller months. That should little recognition costs, making much existent property deals profitable. Thus, arsenic profits rise, the banal should besides increase, perchance making Realty Income 1 of the smartest dividend stocks to buy.