Realty Income: revenue up 9.7%, but all profit growth is one-offs and revaluation

5 августа Realty Income раскрыла результаты за второй квартал 2026 года. Выручка выросла на 9,7% год к году, до 1 547,7 млн долл., EBITDA — на 21,1%, а чистая прибыль — на 88,2%, до 370,5 млн долл.. Однако почти весь прирост прибыли обеспечен разовыми статьями: снижением резервов под обесценение и кредитные убытки, а также ростом процентных доходов по кредитам. На текущей цене акция выглядит скорее привлекательно: бизнес генерирует стабильный денежный поток, но оценка уже учитывает многое из того, что компания обещает в будущем.

Key takeaways

— Revenue grew 9.7% driven by acquisitions, not organic growth

— EBITDA margin jumped to 86.8% on one-off factors

— Net profit rose 88.2%, but almost all from non-operating items

— Operating cash flow of $1,145.1 million in the quarter, but $2.6 billion of investments require debt and equity issuance

— Leverage of 5.4x EBITDA is higher than it looks when all obligations are considered

— Dividend covered by AFFO, but dividend growth lags inflation

— Company raised 2026 AFFO guidance to $4.44-$4.45 per share

Attractiveness

Key figures, USD bn

Revenue grew 9.7% driven by acquisitions, not organic growth

In Q2 2026, Realty Income's revenue reached $1,547.7 million, up 9.7% year-over-year. The main contribution came from acquisitions: the company invested $2.6 billion during the quarter, including in real estate and loans. Organic growth is modest: same-store rental revenue rose only 1.2% year-over-year.

The company continues to expand aggressively, but this expansion requires significant capital. In the first half, investments totaled $5.3 billion, almost double the same period last year. So far, acquisitions are paying off, but their efficiency will only be visible in future periods.

EBITDA margin jumped to 86.8% on one-off factors

EBITDA in Q2 rose 21.1% year-over-year to $1,249.9 million, and EBITDA margin reached 86.8% versus 78.7% a year earlier. The jump is explained not only by operational efficiency but also by lower impairment provisions: in Q2 2025 they were $142.3 million, while in the current quarter only $54.2 million.

Excluding this factor, EBITDA growth would have been much more modest. Nevertheless, the high margin reflects the net-lease business model: tenants bear most property expenses, so operating profitability is structurally high.

Net profit rose 88.2%, but almost all from non-operating items

Net profit for the quarter was $370.5 million versus $199.0 million a year earlier. The 88.2% growth was driven by three factors: lower impairment provisions (by $88.1 million), higher interest income on loans and equity investments (from $39.5 to $88.5 million), and an increase in the share of profit attributable to noncontrolling interests, which is deducted from net profit.

Operating profit rose only 13.5% (from $533.4 to $605.2 million), which is closer to the real business dynamics. One-off items are normal for a REIT, but investors should understand that the 'quality' of earnings is lower than it appears at first glance.

Operating cash flow of $1,145.1 million in the quarter, but $2.6 billion of investments require debt and equity issuance

In Q2, operating cash flow was $1,145.1 million, up 8% year-over-year. However, the company invested $2.6 billion, so free cash flow after investments is negative. The company covers the gap through equity issuance ($843 million in the quarter) and new borrowings.

Over the last twelve months, operating cash flow totaled $4,000 million, but capital expenditures and acquisitions significantly exceed this amount. This means the company is actively using debt and equity capital to finance growth, which dilutes existing shareholders.

Leverage of 5.4x EBITDA is higher than it looks when all obligations are considered

At the end of the quarter, net debt was $30,437.9 million, and the Net Debt to Annualized Pro Forma Adjusted EBITDA ratio was 5.4x. This is higher than many investment-grade REITs and reflects an aggressive acquisition program. The company notes that including expected proceeds from forward equity sales, the ratio drops to 5.2x.

In July, the company issued eurobonds of €600 million and increased credit lines to $5.5 billion, providing liquidity headroom but also increasing debt. Interest expenses rose 10% year-over-year in the quarter to $312.1 million, which will pressure earnings in the future.

Dividend covered by AFFO, but dividend growth lags inflation

Realty Income continues to pay monthly dividends and raises them every quarter. Quarterly payments were $0.8115 per share, up 0.7% year-over-year. AFFO per share rose 3.8% to $1.09, so the dividend is well covered: payout ratio around 74.5%.

However, dividend growth (0.7% YoY) is significantly below inflation and below AFFO growth. For investors seeking growing income, this may be disappointing, although the company maintains a 31-year history of increases.

Company raised 2026 AFFO guidance to $4.44-$4.45 per share

Management raised its 2026 AFFO guidance to $4.44-$4.45 per share, implying growth of about 4% over last year. The slight increase from the previous guidance ($4.41-$4.44) reflects confidence in continued growth, but the pace remains moderate.

The company also reaffirmed its investment guidance of $10 billion for 2026, almost double 2025. This suggests management sees good opportunities for capital deployment, but investors should watch how these investments affect debt and equity dilution.

Valuation on the latest reported figures

Bottom line

Realty Income continues to grow through large acquisitions, but organic growth is minimal and earnings quality is diluted by one-off items. Leverage of 5.4x EBITDA is high, though manageable, and dividend growth lags inflation. Nevertheless, AFFO is growing steadily, and the company raised its 2026 guidance. At the current price, the share looks rather attractive for income-oriented investors, but with risks related to debt and equity dilution.