If You Invested $10,000 in Realty Income 20 Years Ago, This Is How Much You Would Have Today
If you had invested $10,000 in Realty Income (NYSE: O) 20 years ago, those shares would be worth around $40,000 today. That's not bad, but it falls short of the $47,500 you'd have had if you'd invested in an S&P 500 index fund instead. Only this comparison lacks context in a very important way. Here's why Realty Income was a much better investment than the S&P 500 over the last two decades.
Realty Income is a real estate investment trust (REIT), a corporate structure designed to pass income on to shareholders. REITs were basically created to allow small investors the opportunity to benefit from the cash flows generated by institutional-level properties. So long as a REIT pays out 90% of its taxable income as dividends, it pays no income taxes. Though that means that shareholders have to pay taxes on the dividends as if they had earned income, that income avoids double taxation. All of these REIT basics are a way to highlight the fact that when you talk about REITs, you have to consider the dividend angle, or you aren't really thinking about the full picture.
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Source Fool.com
