Realty Income Corp. completed another year of strong operating performance, delivering favorable risk-adjusted returns for our shareholders. “We are pleased to have provided our shareholders with a 15.2% total shareholder return in 2018, meaningfully outperforming major benchmark indices,” explained Sumit Roy, president and CEO. During the year, he said, the REIT invested $1.8 billion in real estate properties and increased AFFO per share by 4.2% to $3.19.
“We ended 2018 with a debt-to-EBITDA ratio of 5.3 times, which positions us well entering 2019 with ample liquidity and flexibility to pursue our growth initiatives, while maintaining a conservative capital structure,” he said. “2019 marks the 50th anniversary of our company’s founding and the 25th year since our public listing. And we are proud to have increased the dividend 100 times in our company’s history as of the February 2019 dividend payment.”
On the firm’s Q4 earnings call, he noted that the REIT entered 2019 from a position of strength and is introducing 2019 AFFO per share guidance of $3.25 to $3.31, which represents annual growth of approximately 2% to 4%. “Our portfolio continues to be diversified by tenant, industry, geography and to a certain extent property types, which contributes to the stability of our cash flow. At year-end, our properties were leased to 262 commercial tenants in 48 different industries, located in 49 states and Puerto Rico. 82% of our rental revenue is from our traditional retail properties.”
The largest component outside of retail is industrial properties at just over 12% of rental revenue, he added. “Walgreens remains our largest tenant at 6.3% of rental revenue. Convenience stores remains our largest industry at 12.4% of rental revenue. Within our overall retail portfolio approximately 95% of our rent come from tenants with a service nondiscretionary and/or low price point component to their business.”
He explained that “these characteristics allow our tenants to compete more effectively with e-commerce and operate in a variety of economic environments. These factors have been particularly relevant in today’s retail climate, where the vast majority of recent U.S. retail bankruptcies have been in industries that do not possess these characteristics. We continue to have excellent credit quality in the portfolio with over half of our annualized rental revenue generated from investment grade-rated tenants.”