My Top REIT to Buy in 2025 for Passive Income

Industry Overview - The commercial real estate sector faced challenges in the past year due to higher interest rates, which impacted property values and borrowing capabilities for real estate investors [1] - The S&P U S REIT Index gained only 4 3% in 2023, significantly underperforming the S&P 500's 25% total return [2] - Despite recent underperformance, REITs have outperformed stocks over the longer term [3] Company Focus: Realty Income - Realty Income is highlighted as the top REIT to buy in 2025 due to its strong passive income generation and long-term total returns [3] - The company has paid 654 consecutive monthly dividends and increased its dividend 128 times since its 1994 listing, with 30 consecutive years of annual dividend growth at a 4 2% compound annual rate [4] - An investor who purchased 100 shares in 2013 would have received $3,077 in cumulative dividends by Q3 2023, representing 82% of the original investment, with a current annual dividend income of $308, a 40% increase from the initial $219 [5] Financial Strength and Dividend Sustainability - Realty Income's current dividend yield is over 6%, supported by a conservative payout ratio of around 75% of adjusted funds from operations and a strong balance sheet with A3/A- credit ratings [6] - The company has grown its adjusted funds from operations per share at a 5% compound annual rate since 1995, accelerating to 6% since 2012 [10] Market Opportunity and Growth Strategy - Realty Income is the seventh-largest global REIT, owning $58 billion of commercial real estate across eight countries, with a portfolio primarily in retail (79 4% of annual base rent), industrial (14 6%), casinos (3 2%), and data centers (2 8%) [7] - The company estimates the total addressable market for net lease real estate at $5 4 trillion in the U S and $8 5 trillion in Europe [8] - Realty Income has expanded into new verticals like data centers and casinos, adding $700 billion to its U S market opportunity, and entered additional European countries, increasing its opportunity set by $5 9 trillion [9] - The company has launched a private capital fund management platform, accessing an $18 8 trillion pool of potential investors [9] Long-Term Performance - Realty Income has delivered an average annual total return of 14 1% since its 1994 listing, combining income and growth [11] - The company is positioned to continue growing at a mid-single-digit rate, supported by its financial flexibility, market opportunity, and private capital management business [10][12]