This Robinhood Inventory Has a Trailing 5% Dividend Yield — Is It Too Good to Be True?

Traders are proper to be leery of shares with excessive dividend yields. Though such returns seem enticing on the floor, traders need to keep in mind that dividend shares that aren’t actual property funding trusts (REITs) can regulate dividend funds at any time. Furthermore, REITs have the identical freedom so long as they pay out no less than 90% of their web earnings in dividends.

This truth could go away traders questioning what to do a couple of REIT referred to as Realty Revenue (NYSE: O), a well-liked inventory on the Robinhood Markets platform. Recognized for paying a month-to-month dividend, its 5% dividend yield is greater than quadruple the S&P 500 common of 1.2%. Does that prime return make the payout too good to be true? Let’s take a better look.

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Realty Revenue owns greater than 15,500 single-tenant, net-leased properties. Below the phrases of those contracts, the tenant pays for insurance coverage, property taxes, and upkeep, guaranteeing a gentle earnings for the owner.

Moreover, occupancy is slightly below 99%, that means the corporate is all the time trying to purchase or develop extra properties. Additionally, since its tenant listing contains corporations like House Depot, Greenback Basic, and Tractor Provide, it boasts a gentle shopper base.

That property portfolio funds a $3.24 per share annual dividend, and its month-to-month payout has risen no less than as soon as per 12 months since its inception in 1994. That streak units an expectation of periodic dividend hikes, and it may undermine confidence within the inventory if its payout didn’t rise no less than one time per 12 months.

For that cause, Realty Revenue is unlikely to slash its dividend until it can not afford to maintain it. Happily, dividend affordability doesn’t seem like a difficulty for this firm.

Within the third quarter of 2025, it earned $4.20 per share in funds from operations earnings, a measure of a REIT’s free money movement. That money permits Realty Revenue to cowl the $3.24 per share in dividends and leaves some money accessible for different functions.

Traders also needs to word that decrease inventory costs enhance dividend yields. Therefore, the truth that Realty Revenue inventory trades at a reduction of over 20% from the all-time excessive has contributed to the upper dividend returns.

Furthermore, the Fed has minimize rates of interest in latest months. That ought to decrease credit score prices, making extra actual property offers worthwhile. Thus, as income rise, the inventory also needs to improve, presumably making Realty Revenue one of many smartest dividend shares to purchase.

Finally, Realty Revenue can afford to maintain its dividend regardless of its 5% yield.

Certainly, traders ought to flip cautious after they see such yields, and simply because a inventory is well-liked on Robinhood doesn’t imply traders can buy it.

Happily, Realty Revenue’s FFO earnings far exceeds the price of its dividend. Moreover, the REIT presents shareholders a steady tenant base, a excessive occupancy price, and continued enlargement. Therefore, its traders ought to profit from a high-yielding, rising dividend and, over time, the next inventory worth fueled by decrease rates of interest.

Before you purchase inventory in Realty Revenue, take into account this:

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Will Healy has positions in Realty Revenue. The Motley Idiot has positions in and recommends House Depot, Realty Revenue, and Tractor Provide. The Motley Idiot recommends the next choices: quick April 2026 $55 calls on Tractor Provide. The Motley Idiot has a disclosure coverage.

This Robinhood Inventory Has a Trailing 5% Dividend Yield — Is It Too Good to Be True? was initially revealed by The Motley Idiot