The Fed Has Stopped Cutting Rates. Why Investors Should Stay the Course With Realty Income Stock.

Key Points
Realty Income continues to expand as it obtains more capital at low interest rates.
Do not forget about its generous monthly dividend.
The stock is not as expensive as its P/E ratio implies.
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Realty Income's (NYSE: O) pandemic bounce ended when the market experienced one of the most profound interest rate shocks in history. Even though it recovered some of its lost value over the last couple of years, it has pulled back now that the prospects for further interest rate cuts have dimmed.
However, instead of selling the stock, now may be the time to stay the course in the monthly dividend company. Here's why.
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Realty Income's current state
Realty Income owns more than 15,500 single-tenant, net leased properties. Investors tend to like such arrangements, as tenants cover the insurance, maintenance, and tax expenses, giving the company a steady revenue stream.
Moreover, it tends to attract blue chip clients such as Dollar General, Wynn Resorts, and Tractor Supply, providing for a stable client base. Clients like these also keep its occupancy level at almost 99%. Also, interest rates did not stop it from making nearly $6.3 billion in additional property investments in 2025, and it is hitting the accelerator this year.
Additionally, Realty Income seems to be getting favorable loan terms. In 2025, the company issued convertible senior notes with rates ranging from 3.375% to 5.125%, showing that low-cost capital continues to fund its expansion.
Realty Income by the numbers
Not surprisingly, that led to $5.75 billion in revenue in 2025, a 9% yearly increase. Although interest costs rose by almost 12%, Realty Income largely held the line on rising costs and expenses. Hence, the $1.06 billion in net income attributable to the company was 23% higher than year-ago levels.
Still, because it is a real estate investment trust (REIT), funds from operations (FFO) income is arguably the more critical metric. FFO income does not deduct charges like depreciation and amortization, providing a clearer picture of the cash it generates. In Realty Income's case, that came to $3.89 billion in 2025, or $4.25 per diluted share.
Admittedly, that would probably be higher if interest rates were lower. Still, it is enough for the monthly dividend company to cover its nearly $3.25 per share in annual payouts. That yields a 5.1% cash return at current prices, far above the S&P 500's (SNPINDEX: ^GSPC) 1.2% average dividend yield.
Furthermore, Realty Income is not as expensive as it appears. Its 54 P/E ratio may appear pricey. Nonetheless, when measured against FFO income, its price-to-FFO ratio is only about 15, making the REIT look like a bargain that many investors have missed.
Stick with Realty Income
Despite interest rates remaining steady, investors should continue investing in Realty Income.
Admittedly, Realty Income would probably earn higher profits with lower interest rates. However, the company has a steady client base and can easily bankroll its dividend and grow its portfolio under current business conditions.
By staying in the stock, investors earn a generous return on the payout and, at least from an FFO income perspective, can buy more shares at a low valuation. Thus, if share prices pull back further, investors should treat it as a buying opportunity and collect dividends while they wait for the stock price to recover.
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Will Healy has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income and Tractor Supply. The Motley Fool recommends the following options: short April 2026 $55 calls on Tractor Supply. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.