在当前较高的收益率水平下，Realty Income 具备吸引力，预期回报可达 8-10%，在利率逆风与股息增长及估值支撑之间取得平衡。

Realty Income becomes an interesting company. The return on investment is increasing. The stock hasn't achieved much in the past five years, but business, real estate, and everything else continues to play its part.

Therefore, now might be the best time than at any time in the past five years to take another look at this company. When it comes to Realty Income, she used to be the queen of real estate investment trusts with monthly dividends and things like that.

But we are now ranked seventh in the iShares US REIT Index.

when the yield on a 10-year Treasury note is at 2%, you feel good about a 3.54% return from Realty Income. Now, the yield on 10-year Treasury bonds is 5.2%. Now you want more Realty Income.

We are at 5.8% dividend yield, which means there is still room for market adjustment. I think when the 10-year Treasury yield settles at 5.2%, because that was a sudden move upward from, say, 4% with expectations of lower rates, which was probably priced in at Realty Income.

If this is just a temporary spike and it will return, then it's okay. But if it stabilizes at this level, you can expect a 7% Realty Income, which means an additional 15-20% decrease.

It is mostly based on retail, but we have grocery stores, home improvement stores, dollar stores, restaurants, etc. It is diverse, but focuses on retail. They are now diversifying away from the retail sector, which was great when the real estate company Realty Inc. started.

But well, they are diversifying now, they have even expanded into Europe and the United Kingdom. The occupancy rate is currently good, and its lowest level, let's say, during the crisis was 96%.

However, if you look at real estate investment trusts (REITs) with lower interest rates since their initial public offering, they have outperformed the S&P 500 by significant numbers.

This is more than double the performance of the S&P 500 index.

Even companies that regularly distribute dividends have outperformed all the giant AI companies. This is extremely interesting over these forty-two years. We have good dividend payouts, good real estate, great tenants, and excellent credit ratings.

So, when you say, "Okay, is this something worth owning?" Things are starting to get interesting. They are diversifying slightly, towards data centers and industry, but the dominant focus remains on retail.

Diversity in elderly care centers, and in Europe.

Well, we have a huge market ahead of us. But what has changed now is interest rates over the past five years, from being in constant decline as we mentioned earlier to exceeding 5% now.

This presentation is from August, so things are no longer up-to-date.

However, when interest rates rise, all the factors that were beneficial to real estate investments and real estate investment trusts are now reversed, and this simply puts pressure on the company.

But the work is still ongoing. They are simply collecting fees on their properties. The occupancy rate is good. Even in difficult times, they must be able to survive.

Even if they have to make some kind of financial adjustment because this relates to earnings before interest, taxes, depreciation and amortization (EBITDA). This results in a 2% reduction in earnings before interest, taxes, depreciation and amortization.

Debt may rise slightly, and then we may breach those commitments, and things will get worse depending on how long the recession or crisis lasts. The stock collapsed by 50%, like the rest of the real estate stocks at that time.

If a terrible recession occurs with rising interest rates, stagflation, declining occupancy, and rising debt ratios, that would be the worst-case scenario for the stock, and I would assume it would fall even further.

However, when you look at what the company is like, if there is inflation, they should be able to increase those rents as the time comes to renew the contracts.

And every year they increase the rents by 5%, 6% or 7%. Over time, those rent increases combined with lower interest rates allow them to increase their dividend payouts by 4% annually.

No growth in bad times, good growth in good times. If tough times are ahead, no one expects growth, but you have to apply that to your portfolio strategy.

So, as far as business is concerned, it's good, but it's still a retail sector.

One must also consider the state of the retail sector 5, 10 or 15 years from now. On the one hand, they say that the general trend is towards aging and retirement. Does this mean more or less foot traffic in those stores?

This is also something to keep in mind. How long will I continue to bet on the retail sector? And of course, what we will discuss later regarding intrinsic value and everything else, at what price?

The main risk is that a real recession will occur, as is the case with most available investments.

Let's discuss the financial data. Then, if we look at the balance sheet, it is of course debt-financed and the leverage coverage ratio is five times, okay. However, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are affected by recessionary times. So, in bad times, those rankings change.

Then, these companies become somewhat worried, but not in a credit-related sense. This is the worst-case scenario. The main question is, will the company survive that scenario?

I think it will survive because it is on the better side of things, and they have already begun to adapt to the high interest rate environment.

Whether this is merely a cosmetic change to the numbers or a genuine management of the cost of interest for the benefit of shareholders, I do not know.

Because yes, the interest rates here with convertible bonds are not 6% but 3.5%. However, if things go well, it will reduce shareholders' stakes in the future. Then they enter into joint ventures with Apollo with equity-like returns, which means no debt, but ultimately, it is debt, depending on how it is structured, renewable capacities, and things like that.

They are also now raising slightly lower-value shares, private capital, insurance capital, and new debt sources because these public bonds have become more expensive and are highly competitive.

Looking at the guidance, it appears acceptable and stable. The guidance has been revised to be slightly lower, but this is normal with rising interest rates.

Apart from that, everything seems stable. We have, perhaps this is the main aspect, benefits rising from 550 million to 600 million over the course of a year, that's significant growth.

What is it? A 9% increase in interest costs. This cuts 50 million from distributed profits, and prevents the growth of those profits there. 25 billion in net debt. Let's assume that the cost at 4% was equal to one billion.

If we go higher, the number will reach 1.2 billion. Interest of 6%, or 7%.

If the period of high interest rates continues for a longer time, it could reach 1.5 billion, which would simply devour the growth that real estate investment trust (REIT) investors have enjoyed over the past forty years.

But well, convertible bonds are having an effect, however, if we look at previously issued coupons, even Google is now issuing at 6% interest. Therefore, we should assume higher interest costs if interest rates rise.

If this continues over time, it will continue to put pressure on the stock, and we may see further declines. However, on the other hand, you have what the market wants. The market, under high interest rates, wants higher returns.

If you own it, what will you get? You will get a higher return than when the rate was 3%, and that was my opinion at the time. I have always said that real estate investment trusts (REITs) at 3% are risky. If interest rates rise, you won't earn much.

Now, with rising interest rates, it's interesting because no matter what happens, you get something in return. If interest rates reach 15%, then of course the situation will be bad.

But you are still mitigating this decline thanks to a return of between 5% and 6%.

With rising interest rates, everything that used to work positively began to work negatively. Higher returns, rising debt costs, and slightly declining property values are putting pressure on the stock.

But, if the price trend eventually reverses, everything will work in reverse, and I wouldn't be surprised to see a 50% improvement in the stock price to reach 70-80. Shareholders' equity is close to 40 billion, and the market value is 52 billion. So, at these values, we are not far from that.

The leverage metrics appear acceptable. 44%, not 40% as net debt to total enterprise value. So, it's not excellent, but it's not extremely risky either. I have seen much worse ratios.

For Realty Income, just click here, and the main entry point is the $3 dividend. If we have a growth rate of only 2%, and the market is satisfied with a dividend yield of 5% going forward, then the intrinsic value of a 10% yield is close to the current share price.

With more optimistic growth rates, everything going well, interest rates lower, and the market satisfied with a 4% dividend yield, the final multiple is 100 divided by 25, which equals 4%.

This is the seventy I told you about as a positive aspect.

In the worst-case scenario, let's say interest rates continue to put pressure on the dividend yield, bringing it down to the required rate of 7%. The current value is in the forties, but then you get higher dividends that you can reinvest and build the value of your portfolio.

So, when we move to the comparative table, it is not very cheap, but it gives you a good return, like "Ahold" for example. So, perhaps when comparing these options, we get a potential return with a lower risk of 9% in the future, which is not bad.

When it comes to the value investment square, 9% real estate ownership, in US dollars, I have to put it on the better side. I will reorganize this perhaps if I can get it done over the weekend to make it more comfortable for the eyes. We will work on that.

So, regarding expected returns, we already have dividends. If the underlying business continues to grow, things should be fine. The main risk is a high interest rate environment, but if nothing crazy happens, there is inflation cushioning with rising lease renewals.

Expected return is between 8 and 10%, and you can build something with this. The main risk is the severity of the recession. I am from Europe, so I believe I should pay a 40% withholding tax or something similar on these real estate investment trusts.

I don't know if Croatia has an agreement with the United States, but I have 6% of European companies. So, for me, it's not very interesting at the moment.

But, if you are exempt from US taxes, you might start looking at it now, not when REITs are yielding 3%, but now that it's starting to get interesting.

Building a financial center, and being prepared to expand it if the price becomes cheaper. Then when interest rates come down and stabilize, and things get better, who knows when, patience over time, protection from inflation, and things like that.