Is Realty Income’s 4.8% Yield Worth the Risk Now?

Key Points

• With fixed-income yields compressed, equity income has become more attractive—but it brings principal risk.
• Realty Income’s appeal continues to center on stable cash flow and high occupancy, alongside its monthly dividend cadence.
• The dividend remains dependable, but slow dividend growth and an elevated payout ratio are key items to monitor.

With the Federal Reserve’s last interest rate cut in December 2025, the central bank’s benchmark effective federal funds rate sits at just 3.64%. In turn, yields on fixed income products have been reduced to the point that, in many cases, income investors are being forced to turn to equities to fill the void. 

Today’s best rates on CDs, for instance, are hovering around 4%, while only longer-dated Treasury notes and bonds are currently offering coupon rates above 4%. 

Some corners of the equity markets are already providing better yields. Yardeni Research data indicates that at 5%, dividends from real estate have the highest average yield of any sector (with utilities and energy following with 3.9% and 3.7%, respectively). 

For one stock in particular, its dividend has become its calling card. Its latest earnings report offers a fresh read on the business—and the risks.

Realty Income’s Monthly Dividend Brand Rests on Stable Cash Flow and High Occupancy

Among yield-focused investors, Realty Income NYSE: O has become a household name. The real estate investment trust (REIT) has been on a run, during which the company has raised its dividend for 113 consecutive quarters. 

As a result, shares of O have become a staple in dividend portfolios, accentuated by a distribution cadence that has resulted in the REIT billing itself as The Monthly Dividend Company.  

When the REIT reported full-year and Q4 2025 financials on Feb. 24, it announced adjusted funds from operations (AFFO) of $1.08, in line with analyst expectations. The company beat on revenue with $1.49 billion, just above analyst expectations of $1.4 billion. 

But REITs—which are by law obligated to pay out 90% of their taxable income to shareholders in the form of dividends—aren’t expected to produce jaw-dropping funds from operations.

Rather, investors should look at how the world’s sixth-largest REIT is providing stability. 

Realty Income’s total occupancy rate—involving a portfolio of approximately 15,511 properties spanning around 355 million square feet—stands at 98.9%. Around 91% of the portfolio operates in non-discretionary, service-oriented retail or low-price-point businesses, which are resilient to economic downturns. 

Another indication of stability is the REIT’s improving valuation. On a trailing 12-month basis, Realty Income’s price-to-earnings (P/E) ratio of 61.54 was elevated. But its forward P/E of just 15.86 means that, in addition to its alluring yield, Realty Income is currently offering some value.

Chasing Equity Income Comes With Principal Risk

Still, for investors increasing their exposure to equities in order to bolster income, concerns about financial asset erosion are warranted. Fleeing fixed income—and its perceived near-zero risks—for risk-on equity investing can present threats to principal. 

But after trading within a well-defined range for most of the past year, Realty Income has broken out with a more than 15% year-to-date gain. Asset erosion remains a risk, though, as shares are down nearly 12% from their five-year high on Aug. 12, 2022—losses that haven’t been offset by the stock’s yield.

Realty Income’s Dividend Is (Slowly) Growing

The dividend that makes O so attractive currently yields 4.8%, or $3.24 per share annually. That’s better than most fixed-income instruments and just shy of the real estate sector’s average 5% yield. 

After 32 years of consecutive dividend increases, Realty Income is a member of the vaunted Dividend Aristocrats club. 

Checking Realty Income’s Financial Health

That doesn’t suggest the REIT’s track record of consecutive dividend increases is at risk. According to TradeSmith, Realty Income’s financial health is firmly in the Green Zone, where it’s been for over seven months. 

Q4 revenue marked an 11% year-over-year increase, and over the past five years, the company’s revenue growth has averaged an eye-catching 29.85%.