This S&P 500 Stock Has a Tremendous 5.6% Yield and Pays Monthly Dividends

In a world where the S&P 500’s average dividend yield hovers around a meager 1.3%, one S&P 500 constituent stands out as a beacon of income potential: Realty Income Corporation (NYSE: O). With a 5.6% dividend yield and monthly payouts, Realty Income isn’t just an outlier—it’s a masterclass in steady, predictable returns. For investors seeking to build a reliable income stream, this “Dividend King” merits serious consideration.

The Dividend Machine: Why 5.6% Matters

At a time when interest rates remain historically low and traditional savings accounts offer little more than dust, Realty Income’s 5.6% yield is a rarity. But what truly distinguishes this stock is its 30-year track record of annual dividend increases, a consistency unmatched by all but a handful of companies. Unlike many high-yield stocks that prioritize payouts at the expense of growth, Realty Income has compounded its dividend at a ~4% annual clip, outpacing inflation and ensuring purchasing power stays intact.

The dividend’s safety is bolstered by its monthly payout schedule, a feature that sets Realty Income apart. While most REITs (real estate investment trusts) pay quarterly, the monthly cadence provides retirees and income-focused investors with a “paycheck replacement” rhythm.

The Business Model: Net Leases and Diversification

Realty Income’s success hinges on its net lease strategy, which underpins its ability to sustain such a high yield. The company leases properties to tenants—think Walgreens, 7-Eleven, and FedEx—that agree to cover all operating expenses, including maintenance, insurance, and taxes. This structure shifts risk to the tenant, leaving Realty Income with stable, low-maintenance cash flows.

While single-tenant retail properties (comprising 75% of its portfolio) are the backbone, Realty Income has expanded into industrial assets, vineyards, and even European properties, diversifying both geographically and by sector. This approach mitigates overexposure to any single industry or region.

The scale of its operation—15,600+ properties—also provides economies of scale and negotiating power with tenants. Combined with an investment-grade balance sheet, this creates a fortress-like financial foundation.

How Does It Compare?

To contextualize Realty Income’s appeal, consider two key comparisons:
- vs. the S&P 500: The broader market’s average yield is 1.3%, and most components don’t offer monthly dividends.
- vs. other REITs: The typical REIT yields around 4%, with fewer than 10% of REITs boasting a 5%+ yield. Realty Income’s 5.6% is among the highest in the sector.

The Caveats: Growth Isn’t Explosive

Critics argue Realty Income’s “tortoise-like” growth—its dividend hikes average just 4% annually—is a drawback for those seeking high total returns. Indeed, the analysis notes it doesn’t rank among the top 10 “best” monthly dividend stocks by total return expectations.

But this misses the point: Realty Income isn’t a growth stock. It’s a core holding for income investors, akin to a bond but with higher yields and inflation protection. For those willing to prioritize stability over speed, the trade-off is worthwhile.

Conclusion: A Steady Hand in Volatile Times

Realty Income’s 5.6% yield, monthly dividends, and 30-year dividend growth streak make it a standout in today’s low-yield environment. Backed by a proven net-lease model, a diversified portfolio, and an investment-grade balance sheet, it offers a rare combination of income security and inflation resilience.

For investors seeking to build a passive income stream—or simply hedge against market volatility—Realty Income is more than a stock. It’s a blueprint for financial reliability. While it may not set the world on fire with growth, its track record speaks volumes: consistency, in investing, is often the quietest form of genius.