We recently published a list of Dividend Capture Strategy: 15 High Yield Stocks to Buy in April. In this article, we are going to take a look at where Realty Income Corporation (NYSE:O) stands against other best high yield stocks to buy in April.
Dividend investing appears to be a simple strategy on the surface, but in reality, it requires a much deeper analysis. These stocks are best known for their long-term appeal, a trait recognized by seasoned investors. Over the years, dividend growth stocks have outperformed other asset classes during periods of economic downturns.
This can also be observed in today’s economic landscape. With the Trump administration’s trade war or soft economic data, dividend stocks have the potential to outperform, according to analysts. In addition, these equities are currently trading at lower price-to-earnings ratios than the broader market, which could be a great entry point for income investors. Wolfe Research analyst Chris Senyek also advised investors to pay attention to dividend growth stocks as they can serve as a buffer against market downturns. Here is what he said:
“Our favorite defensive dividend strategy, dividend aristocrats, is a good place for investors to ‘hide’ in the event of an economic slowdown or recessionary environment.”
For this, he recommends investing in the Dividend Aristocrats Index, which tracks the performance of companies that have achieved 25 consecutive years of dividend growth. The index is outperforming the broader market this year, surging by over 2%, compared to the market’s nearly 5% decline.
Though dividend aristocrats are gaining this year, their performance in the last two years has been less impressive. With AI taking center stage, dividend stocks were overlooked by investors, leaving many still trading at a discount. Analysts are presenting a strong outlook for dividend stocks this year because of the changing economic and political landscape. According to a report by BNY Investments, dividend stocks are poised for growth this year as tech stocks have also entered into the dividend territory last year. Combining factors of growth and income can bode well for dividend equities. As of September 2024, nearly 80% of the companies in the S&P index pay dividends to shareholders, 24% of which are from the tech sector. The percentage has grown significantly from 13% a decade ago, as reported by BNY.
Dividend yield is an important aspect of dividend investing, and investors often pay attention to yields when making investment decisions. However, falling for yield traps does more harm than good. Dan Lefkovitz, a strategist for Morningstar Indexes, made the following comment for investors with a preference for high yields:
“It’s really critical to be selective when it comes to buying dividend-paying stocks and chasing yield. Looking for the most yield-rich areas of the market can often lead you into troubled areas and dividend traps—companies that have a nice-looking yield that is ultimately unsustainable. You have to screen for dividend durability and reliability going forward.”
While dividend stocks are mostly known for their long-term appeal, some investors also reap profits in the short term through a dividend capture strategy. By using this approach, investors can buy shares of the company just before it pays dividends and then sell those shares shortly after receiving the dividend. The main aim of this strategy is to capitalize on dividend income while also benefiting from a stock’s price increase leading up to the dividend announcement. Given this, we will take a look at some of the best dividend stocks for a dividend capture strategy.
25 Fastest Growing Real Estate Markets in the US
Our Methodology:
For this list, we selected dividend stocks that will trade ex-dividend in April 2025. Ex-dividend date indicates the cutoff day to buy a stock to receive its upcoming dividend payment. These stocks have dividend yields above 2%, as of March 30. The stocks are ranked according to their ex-dividend dates.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Realty Income Corporation (NYSE:O)
Ex-Dividend Date: April 1
Dividend Yield as of March 30: 5.69%
Realty Income Corporation (NYSE:O) is an American real estate investment trust company, headquartered in California. The company mainly invests in single-tenant commercial properties across the country. It reported a strong performance in the fourth quarter of 2024, with its revenues coming in at $1.34 billion, up significantly by 24.4% from the same period last year. The company’s Adjusted Funds From Operations (AFFO) per share also grew by 4% to $1.05 per share, which registered its 14th consecutive year of AFFO per share growth.
Realty Income Corporation (NYSE:O) has a portfolio of 15,600 properties, and nearly 80% of them are leased to retailers. The company’s holdings are mainly well-known retailers, including Dollar Tree, 7-Eleven, and Walgreens. In addition, grocery and convenience stores represent 20% of its portfolio. The company’s growing portfolio significantly contributes to its dividend policy.
Realty Income Corporation (NYSE:O) offers monthly dividends to its shareholders, which makes it a reliable option for income investors. It currently offers a monthly dividend of $0.2685 per share, having raised it by 0.2% in March. This was the company’s 130th dividend hike since it went public in 1994. With a dividend yield of 5.69%, as of March 30, O is one of the best dividend stocks for a dividend capture strategy. The stock will trade ex-dividend on April 1.
Overall, O ranks 15th on our list of the best the best high yield stocks for a dividend capture strategy. While we acknowledge the potential of O as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than O but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
