O vs. KIM: Which Retail REIT Deserves a Spot in Your Portfolio Now?

Core Viewpoint - The retail real estate sector is showing resilience, with Realty Income and Kimco Realty competing for investor interest, each with distinct business models, strategies, and risk profiles [1][2]. Realty Income - Realty Income employs a triple-net lease model, primarily leasing to essential retailers, ensuring predictable cash flows [3]. - As of March 2025, Realty Income operates 15,627 properties across the U.S. and Europe, focusing on investment-grade tenants for diversification [3]. - The company has a growth strategy that includes investments in industrial, gaming, and data centers, with $1.37 billion invested in Q1 2025 at a 7.5% initial yield, expecting total investments of around $4 billion for the year [4]. - Realty Income maintains a strong balance sheet with $2.9 billion in liquidity, a net debt to pro forma EBITDAre ratio of 5.4X, and fixed charge coverage of 4.7X [5]. - The company has a history of consistent dividend growth, with 110 consecutive quarterly increases and a 4.3% CAGR since 1994, providing income visibility [6]. Kimco Realty - Kimco Realty specializes in open-air, grocery-anchored shopping centers, focusing on densely populated, high-growth markets, with 82% of its annual base rent coming from these areas [7]. - The REIT has achieved 85% of its annual base rent from grocery-anchored properties, which are resilient during economic downturns, and has strong leasing activity with 4.4 million square feet signed in Q1 2025 [8]. - Kimco has $2 billion in liquidity, a net debt/EBITDA ratio of 5.3, and a solid asset base, with 94.8% unencumbered assets and an 8.2-year debt maturity [9]. - The company has shown strong dividend growth post-pandemic, with nine increases over five years and a 15.31% annualized growth rate [9]. Financial Estimates - The Zacks Consensus Estimate for Realty Income's 2025 sales and funds from operations (FFO) per share indicates year-over-year growth of 6.47% and 1.91%, respectively, but FFO estimates have been trending downward [11]. - In contrast, Kimco's 2025 sales and FFO per share estimates imply year-over-year growth of 4.00% and 4.24%, with FFO estimates trending upward [11]. Price Performance and Valuation - Year-to-date, Realty Income shares have increased by 3.1%, while Kimco's stock has declined by 8.4%, against a backdrop of a 4.4% decline in the Zacks REIT and Equity Trust - Retail industry [13]. - Realty Income is trading at a forward price-to-FFO of 12.75X, close to its one-year median, while Kimco is at 12.29X, below its one-year median [15]. Conclusion - Realty Income is characterized by a low-risk income investment model with consistent dividend growth and a strong balance sheet [17]. - Kimco offers a compelling mix of defensive assets, strong leasing momentum, and disciplined financial management, positioning it well for long-term value creation [17]. - Kimco's attractive valuation and upward estimate revisions suggest it may be the better choice for long-term investors [18].