Realty Income stock has come under intense pressure since August, when it peaked at $66.55. It bottomed out at $55.00 last week, its lowest level since January 7 this year. It has slumped by over 16% from the year-to-date high, which has helped boost its dividend yield to 5.65%. So, is it safe to buy the dip?
Realty Income stock dives as bond yields jump
Realty Income stock has been in a strong freefall in the past few weeks as investors remain concerned about rising interest rates and bond yields. The benchmark ten-year yield jumped to 5.12%, while the three-month bill is yielding over 4.2%.
Realty Income is usually popular among income investors, who like its strong track record of its dividend payouts. It has grown its dividends in the last 30 years, making it one of the few dividend aristocrats in the United States.
Therefore, these income investors are likely moving to short-term treasuries, which are offering them an equally attractive yield.
There is a likelihood that these yields will continue rising in the coming months. For one, the US debt has jumped to over $40.2 trillion, and this trend will continue as the deficit spending gains steam.
The rising interest rates have also affected Realty Income’s interest payments, which have continued to rise in the past few months.
Realty Income’s business is doing well
Despite the challenges, Realty Income’s business is doing well this year. Its recent results showed that revenue jumped to $1.54 billion in the June quarter from $1.41 billion in the same period last year.
At the same time, its net income per share rose to 37 cents from 22 cents in the same period last year. This revenue came from its 15,588 properties, which are leased to 1,798 clients spread across 92 industries. Most importantly, it has a portfolio occupancy rate of 98.8%.
Some of its biggest clients are companies like Dollar General, 7-Eleven, Walgreens, and Family Dollar. Most of these clients are in the grocery, convenience stores, and home improvement industries.
Analysts believe that its business will continue to do well this year. The average estimate among analysts is that its revenue will jump to $5.7 billion, up by 6.16% from a year earlier. It will then jump to $6.16 billion next year.
Even so, some analysts have lowered their targets recently, with Scotiabank reducing its target from $67 to $59.
Realty Income stock price technical analysis
O stock chart | Source: TradingView
The weekly chart shows that the O stock price has slumped in the past few weeks, moving from a high of $66.20 to the current $55.54. It has dropped below the Major S/R pivot point of the Murrey Math Lines tool.
The stock has also dropped to the 38.2% Fibonacci Retracement level and the 50-week moving average. Also, the Relative Strength Index (RSI) has continued falling, and is slowly approaching the oversold level of 30.
Therefore, the path of the least resistance for the stock is downwards, with the next key target to watch being at $50.
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