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Realty Income (NYSE:O) has raised its dividend for about 30 straight years. The stock is up about 14% so far this year. But should you buy the stock just because of the monthly dividend? What's the underlying business moat?

The moat is straightforward: the company owns real estate in prime locations, and once it owns the land, competitors can't just build next door. That lets Realty Income keep raising rents as leases renew and inflation escalators kick in.

A Portfolio Built For Stability

Realty Income owns or holds interests over 15,000 properties across 1,786 clients in 92 industries, spanning the U.S., the U.K., and seven other European countries. Occupancy runs at 98.9%, and the weighted average lease term is 8.7 years. Lease expirations are staggered too — only 2.2% of annualized base rent comes up this year, and just 39.1% expires over the next five years combined. The top tenant, Dollar General, accounts for only 3.3% of annualized base rent, with 7-Eleven at 3.2% and Walgreens at 3.1%. Retail makes up 79% of the portfolio, but the mix leans defensive: grocery stores are 11% of annualized base rent, convenience stores 9.4%, and home improvement 6.4%.

Q1 Growth And Raised Guidance

First-quarter revenue rose 12% year over year. Management raised full-year 2026 investment guidance. Same-store rent growth is guided at 1%–1.3%.

Europe Is A Funding Edge, Not Just A Growth Outlet

Europe now makes up 20% of Realty Income's annualized base rent. The bigger advantage is cost of capital: euro-denominated debt prices roughly 100 basis points below comparable U.S. dollar debt, giving Realty Income a cheaper funding source and a natural currency hedge. Management has also called Europe a less crowded market than the U.S., which lets the company negotiate more tailored deals.

Data Centers And Private Capital

Realty Income is moving into data centers through a joint venture with Digital Realty Trust, positioning itself for AI infrastructure demand. It's also growing a private capital arm: Apollo committed $1 billion to a 500-property retail portfolio in Q1, keeping Realty Income as manager with a 51% stake, and GIC invested for a separate joint venture. Both deals bring in outside capital while Realty Income keeps the management fees and a stake in the upside.

Valuation Against Peers

Realty Income trades at roughly 14.8x forward AFFO. That's a premium to NNN REIT's 13.9x, but a discount to Agree Realty's 17.8x and Essential Properties' 16.3x. Its 4.95% yield beats most of that peer group too — only VICI Properties, at 6.7%, and NNN, at 5%, come close.

What Could Go Wrong

Realty Income carries an A- credit rating and net debt to enterprise value of 34.5%, so leverage isn't an immediate worry. The bigger risk is interest rates: higher rates pressure the stock's valuation and squeeze tenant interest coverage. Inflation remains elevated, and if the Middle East war continues and AI-related effects force the Fed to begin raising rates, O could come under pressure.

Tenant credit is a factor too — Walgreens and Family Dollar are both dealing with operational challenges. Realty Income reports Q2 earnings on August 5, and investors will be watching whether AFFO growth holds up once the boost from Q1's lease termination income fades.

While we acknowledge the risk and potential of O as an investment, our conviction lies in the belief that some AI  stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than O and that has 10,000% upside potential, check out our report about the cheapest AI stock.

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