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SA Interview: The Bear Case For Popular Dividend Growth Stock Realty Income With Dane Bowler - Part 2

Published Wed, 11 Sep 2019 09:15:00 -0400 on Seeking Alpha

This interview was selected to be shared with PRO+ subscribers. Find out more about PRO+ here.
Below is part 2 of the PRO+ team’s interview series that provides a contrarian take on popular dividend growth stock Realty Income (NYSE: O). Dane Bowler is an investment manager focused on the real estate space and a long-time Seeking Alpha contributor.
Seeking Alpha: Before we discuss the bearish thesis, what do you think the “consensus” bullish thesis is? Why is it such a popular stock among the dividend growth investing crowd?
Dane Bowler: I believe the reason O has been so popular among dividend growth investors is that it epitomizes everything they look for: Steady fundamentals generating steady cashflows that have fueled over a decade of dividend growth. Realty Income is a well-managed company with a stellar track record.
SA: The impressive dividend history is one of its most attractive qualities – what is your outlook for dividend growth? Is the current/projected dividend covered, and if so, by how much? Will the historical dividend growth slow?
DB: O’s monthly dividend is $0.2265 which sums to about $2.72 annually. The Capital IQ consensus estimate for 2019 FFO is $3.29, indicating an FFO payout ratio of about 83%. If we look at the FAD figure, a few pennies should be taken off for leasing expenses that aren’t in FFO, but even the FAD covers the dividend with a decent margin for error. The dividend is reasonably safe and our bear thesis is not... Read more