1 Reason To Avoid This 4.4% Dividend Payer
With new cases of the coronavirus spiking in the US and worldwide .
With the already historic unemployment levels and job losses in recent months .
And with many Blue Chip stocks looking vulnerable when they’re supposed to be among the best areas to invest your capital.
There are few safe places to invest today. And this number grows smaller every day this crisis lasts.
The key to continue compounding your investments and build wealth is to keep investing well over time.
But another huge part of this that few think of is also losing as little capital as possible.
The fewer investment losses you have the more capital you keep. And the more capital you keep the faster you achieve your retirement goals.
In recent articles I’ve shown you several stocks to avoid investing in…
- 1 Reason To Avoid AT&T And Its 7% Dividend
- 4 Reasons To Avoid Kohl’s
- 1 Reason To Avoid Autozone
- 2 Reasons To Avoid Kraft Heinz
- 1 Reason To Avoid Exxon
- 2 Reasons To Avoid Mastercard
Today I want to show you another stock to avoid so you can grow your investment portfolio safely.
1 Reason To Avoid Monthly Dividend Payer Realty Income Corp
- It’s Overvalued
As of this writing Realty Income Corp (O) is a $22 billion market cap real estate investment trust (REIT) that pays a 4.4% dividend.
REIT’s own and operate income producing property… And in Realty’s case it owns and operates single tenant properties like the following…
- Dollar General
- And more
REIT’s are great income investments because they’re required by law to pay 90%+ of their net income as dividends to shareholders.
And in Realty’s case it even pays a dividend to shareholders monthly which is rare. As of this writing only 56 US stocks pay a monthly dividend.
This monthly high payout is great for income investors and retirement portfolios because it produces stable – and usually growing – dividend income.
Realty is even a prestigious Dividend Aristocrat… These stocks have paid and raised their dividends for at least 25 straight years. As of July 2020, there were only 60 Dividend Aristocrats on Earth.
This all sounds great if you’re looking to earn higher investment returns… And it is.
But it also leads to problems when investing in REIT’s – many of them being massively overvalued. Realty included.
- Its P/E is 43.7.
- Its P/CF is 19.4.
- And its forward P/E is 44.4.
On all these metrics I look to buy investments below 20 to consider buying them.
Realty is well above these numbers which means its overvalued by a large amount.
And this means investing in its stock today gives you no margin of safety in investing terminology.
When you invest in stocks that have a margin of safety it makes the investment safer. And it also means you should expect to earn higher returns owning its stock in the coming years.
The inverse of this is also true…
When you invest in a stock without a margin of safety it makes the investment riskier. And it also means you should expect to earn less owning its stock going forward.
This lack of a margin of safety is the category Realty falls into right now.
But why is it so overvalued?
Because during this pandemic people are looking to buy investments that produce regular and predictable income for their investment portfolios.
There are few places now to invest to earn a good return on your investment safely… This leads to more people buying REIT’s to earn higher investment returns – Realty too.
And this drives share prices too high when compared to its profits and cash flows which makes investing in them riskier.
If you’re looking for a safe dividend income stock for your portfolio you should avoid Realty until it’s cheaper.
Click the links below to see the stocks we recommend helping Depression Proof Your Portfolio to find other dividend payers.
- 3 Stocks That Will Earn You High Returns In The Coming Depression.
- One Thing To Do Today To Protect Your Investments
- 5 Reasons To Buy British American Tobacco
- 3 Stocks To Depression Proof Your Portfolio – Stock #1
- 3 Stocks To Depression Proof Your Portfolio – Stock #2
- 3 Stocks To Depression Proof Your Portfolio – Stock #3
- 4 Reasons To Buy Cummins To Depression Proof Your Portfolio
- 5 Reasons To Buy JM Smucker
- 5 Reasons To Buy General Mills
- 5 Reasons To Buy IBM
- 5 Reasons To Buy Johnson & Johnson
- 2 More Reasons To Buy J.M. Smucker
- 4 Reasons To Buy Microsoft – And 1 Not To
- 5 Reasons To Buy Sony
- 3 Reasons To Buy Wheaton Precious Metals
Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.