Why Realty Income's 5.7% Dividend Yield Could Outpace Inflation Over Decades

The Math Behind Sustainable Passive Income

Realty Income isn’t just another dividend stock—it’s a dividend machine engineered for stability. The REIT trades at NYSE: O and has fundamentally built its business around a single, powerful principle: generating predictable monthly cash payments that actually grow over time.

The foundation is straightforward but effective. Realty Income owns over 15,500 properties across retail, industrial, gaming, data centers, and other sectors. These aren’t leased to random tenants. Instead, roughly 90% of rental income comes from recession-resistant businesses: grocery stores, auto service centers, home improvement retailers. The leases themselves are structured as net leases—meaning tenants pay all operating costs, maintenance, taxes, and insurance. This creates an almost effortless income stream for the REIT.

Currently yielding 5.7%, the payout looks generous. But what makes it sustainable isn’t the yield itself—it’s the conservative payout ratio. Realty Income distributes roughly 75% of its adjusted funds from operations (FFO), keeping 25% as a buffer. This cushion allows the company to weather economic disruptions while still reinvesting in new income-generating assets.

A Track Record Most Can’t Match

Since going public in 1994, Realty Income has raised its dividend 132 times. More impressively, it has paid increasing dividends for 112 consecutive quarters without interruption. That’s 28 years of unbroken dividend growth—a rarity in any asset class.

The numbers tell a compelling story. Over the past three decades, the REIT has grown adjusted FFO per share by more than 5% annually. Despite countless recessions and market cycles, it posted only one negative year in earnings growth: 2009 during the financial crisis. This consistency has translated directly into dividend growth of over 4% per year since the 1994 listing.

But dividends alone don’t build wealth. Realty Income pairs income generation with capital appreciation. Since listing publicly, the REIT has delivered an average annual total return of 13.7%—combining both dividend income and share price appreciation. That compounds into serious money over decades.

The Real Wealth Comes from Reinvestment

Consider a concrete scenario: An investor purchased 1,000 shares at year-end 2014 for $47,710. In that first year, the dividend yield was 4.6%, generating $2,201 in annual income.

Fast forward more than 10 years to late 2025. Those same shares are now worth approximately $60,790. Over this period, the investor collected $31,772 in cumulative dividends—67% of the original investment returned as cash. Meanwhile, the original shares appreciated 27%.

But here’s where reinvestment becomes powerful: The investor now collects $3,234 in annual dividend income, 47% higher than the first year. If those dividends had been reinvested, the position would be substantially larger.

This is the definition of long-term wealth accumulation. The REIT produces income today while quietly compounding shareholder value tomorrow.

Fortress Balance Sheet, Growing Portfolio

Realty Income maintains one of the strongest balance sheets among REITs. This financial fortress allows it to pursue multiple growth strategies simultaneously: acquiring other REITs, executing sale-leaseback transactions, and funding build-to-suit development projects.

The diversification across 1,600+ tenants in 92 industries further reduces concentration risk. If one sector softens, the portfolio’s breadth absorbs the impact.

Why This Matters for Long-Term Investors

Realty Income represents a complete passive income and wealth-building strategy in a single holding. It delivers cash monthly, grows that cash over time, appreciates in value, and reinvests retained earnings into new properties.

For investors seeking to move beyond theoretical portfolio construction toward tangible income growth, this REIT offers a proven 30-year blueprint. The combination of high yield, consistency, and dividend growth creates a compounding machine that works whether markets are rising or falling.