Hi Everyone,
The time has come to sell off my stake in Realty Income Corp (O). This is the first sell in my portfolio and of all the investments I have, I never would have guessed this would have been my first sell. A staple of consistency and tremendous capital appreciation, Realty has all its mojo working. However, that mojo has made the stock pop 17% to start off the year.
They reported good growth numbers as of their last quarterly earnings statement but with a 21 P/FFO ratio currently, I think its a good time to let this go.
Other REIT stocks, namely healthcare REIT's are down significantly this year (see OHI, HCP). I firmly believe that O has gotten a bit ahead of itself here and there are other opportunities that could use some more capital.
I sold 48.3150 shares at $60.65 totaling $2,923.24. I will lose $9.59 per month in dividends or $115 per year.
With this sell, I now have some decent ammunition in my "BB gun" and will be looking to make a purchase soon. Realty had a dividend yield of just 4% meanwhile a REIT like OHI has a yield of 8%. I could look to using half the sell to purchase OHI and the other half to get a faster dividend grower like MMM or AAPL and will come out ahead.
This by no means I will not be an owner of Realty in the future, but I plan to be one at a cheaper price!!
We shall see what happens, but what do you think? Good sell? What are you buying next?
ADD
Can't say I blame you here. O is been pushed up quickly here with so many investors look for 'safe heavens'. I can never fault anyone for taking a profit. Hopefully you can buy back in as shares drop back down to reality.
ReplyDeleteThanks Captain. I love the chart history of O. Very consistent but when they are looking at 5% FFO growth and the stock is up over 17% for the year, I think its time to back off. I'm looking at anything under $55 for a new purchase in them. That's about 4 years of dividends so, I Hope it gets there!
DeleteI hear ya on this one. I'm up 34% on my O shares but I think it will be holding here. Probably not adding shares though. Nice move though. I doubt many would question you here.
ReplyDeleteMy O has appreciated nicely over the time I have held it. I thought about just holding it and stopping the DRIP, but it is early in the year and I might sell some losers depending on dividend increases/decreases and the capital gains will even out. I'll look at it again if it hits $55. I think OHI and other healthcare REIT's have been pushed down a bit too far.
DeleteWhile it's rare to read about sales among the dividend bloggers I can understand you wanting to lock in a capital gain. No one ever went broke doing that and I know you'll consider O again in the future when prices inevitably drop. Now you have some extra cash to deploy in other names that are selling at better values like the Canadian banks, some industrial plays or other REITs like the health space.
ReplyDeleteI love having a bit of extra capital to invest and by the time O comes down, I should have some more to put in it... just hope it drops! When I stare at the O chart, it has shot up quickly 2 times previously and I wanted to lock in gains then.. let just hope the pattern continues. Industrial/health space is a good start to look.
DeleteGot to disagree with move to sell. History has shown us that stocks hitting new highs are the ones most likely to continue hitting new highs. Delivering returns in excess of 15% CAGR with dividends reinvested, with a proven dependable management team will be hard to replace. Kind of like divorcing your wife because she got too pretty.
ReplyDeleteI can understand your position but as long as you understand that I don't plan on making this a permanent divorce. O and I will be remarried again, just hopefully at a cheaper price then currently. If it falls to $55 I'll make 4 years of dividends. Or, if it takes a year to get there, 3 years of dividends. In the mean time, hopefully my investments into "cheaper" stocks pay off. I can't see paying over 20 P/FFO when OHI is less than 12 P/FFO. I truly believe that OHI is becoming best of breed in the healthcare space and will deserve a premium of its own in the future.
DeleteWith that being said, I liked what I saw from the RAI earnings call and picked up some more shares of that company which (off the top of my head) is sporting a forward PE of 18. Very cheap in this market especially when they just merged with LO and will be seeing synergies over the course of the next year. So your comment buying stocks that are hitting new highs delivers 15% CAGR's then you'll be happy with what I did with some of my funds!
Thanks for commenting! This divorce is not final...
ADD,
ReplyDeleteThat's a tough one. I sold it once before and had years worth of $0.01 monthly dividends. I regretted selling it to first time. I'm holding and reinvesting the dividends.
It was tough for me as well, but sometimes you just gotta let something go to know just how much you appreciate it! If I was to hold it, I probably wouldn't be reinvesting the dividends back into more shares of O. I'd use them to buy cheaper stocks.
DeleteTo each their own, good luck to you!
Never in a billion years would I sell a stock of this quality, but hope it works out for you
ReplyDeleteSo far, your comment holds true. I do not intend to be on the sidelines for long, but there is other value in the market besides this name. OHI continues to deliver but still get hammered. Many medical/bio stocks look cheap.
DeleteTo each their own