Realty Income stock has lost momentum in the past two weeks, even as US bond yields have pulled back. The dividend giant ended last week at $56.93, a few points below the October high of $57.6. Focus among investors will be on its upcoming earnings report, which will provide details on its occupancy rate and how it is navigating the high interest rate environment.
Realty Income is a top company in the real estate investment trust (REIT) industry, where it uses the triple net lease approach. The company acquires commercial properties and then leases them to retailers who are then responsible for property taxes, insurance, and maintenance.
Most of its business in the United States, where it offers its properties to companies like BJ’s Wholesalers, Tractor Supply, Dollar General, Family Dollar, and 7-Eleven. It has over 15,588 properties and close to 1,800 clients, making ot the seventh largest REIT in the US.
Investors love Realty Income because it has a long history of offering stable income and consistent growth through the market cycles. It has hiked dividends for over 31 consecutive years, making it a dividend aristocrat.
Realty Income stock has dropped sharply in the past few months because of the elevated bond yields. The benchmark ten-year yield rose to a two-decade high of 5.3% in October before paring back some of those gains.
In most cases, investors normally rotate from REITs and other income-focused assets when interest rates are rising. Higher rates makes bonds more attractive. They also have a negative impact on the value of real estate.
The next important catalyst for Realty Income stock is the upcoming financial results, which will provide information about its business and occupancy rate.
Yahoo Finance data shows that analysts expect the upcoming earnings report will show that its revenue rose by 4.34% in the third quarter to $1.45 billion. The most optimistic analyst expects the revenue to be $1.47 billion.
These results will provide more details about its revcent pivot to the data center industry, which the management believes has a total addressable market of $1 trillion. The business accounts for a small share of Realty Income’s business but the management expects it to keep growing.
Additionally, the results will provide hints on its occupancy rate, which has been quite strong. It ended the second quarter with an occupancy rate of 98.4%, much higher than REITS’average of 94.9.
O stock chart | Source: TradingView
The daily chart shows that the Realty Income shares have attempted to bounce back in the past few weeks. They hit a major barrier at $57.43, which coincided with the 50-day Exponential Moving Average (EMA).
The Average Directional Index (ADX) has slipped to 26 from last month’s high of 53.4. A falling ADX is a sign that a rally is losing momentum.
The stock has also formed a rising wedge pattern. Therefore, the stock will likely pullback, potentially to the key support level of $54, down modestly from the current $56.93.
