O vs. REG: Which Retail REIT Offers More Resilient Income?

Core Viewpoint - In the current market characterized by economic uncertainty, real estate investment trusts (REITs) focused on necessity-based retail are increasingly seen as defensive income investments, with Realty Income and Regency Centers highlighted for their scale and income-generating capabilities [1][22]. Realty Income - Realty Income, known as "The Monthly Dividend Company," has a diversified portfolio of over 15,600 properties across the U.S., U.K., and Europe, focusing on single-tenant, triple-net leased assets, resulting in a 95% EBITDA margin [4][6]. - Approximately 91% of Realty Income's rent comes from tenants in resilient industries such as dollar stores and pharmacies, and the company has expanded into high-growth sectors like data centers [5][6]. - The company has maintained a 98.5% occupancy rate and has delivered positive operational returns for 29 consecutive years, with a median annual growth of 5.5% in adjusted funds from operations (AFFO) per share since 1996 [6][7]. - Realty Income has a strong financial position with an investment-grade credit rating (A3/A-), a 5.61% dividend yield, and a history of 111 consecutive quarterly dividend increases [7][8]. - However, the retail-focused portfolio faces vulnerabilities related to tariff issues and tenant bankruptcies, alongside a significant debt load of $27.6 billion [8]. Regency Centers - Regency Centers specializes in open-air shopping centers, with around 85% of its properties anchored by top-performing grocers, providing income stability during economic downturns [9][10]. - The REIT operates 480 grocery-anchored centers in affluent suburban markets, supporting long-term tenant performance and rent growth, with same-property lease rates exceeding 96% [11]. - Regency maintains a robust development pipeline with approximately $500 million in active projects, aiming for yields at least 150 basis points above private market cap rates [12][13]. - The company has a solid financial position with sector-leading credit ratings (A3/A-), low leverage, and $1.2 billion in liquidity [13]. - However, Regency faces challenges from growing e-commerce adoption and operational costs associated with multi-tenant properties, which may compress margins [14]. Financial Estimates and Performance - The Zacks Consensus Estimate for Realty Income's 2025 sales and FFO per share indicates year-over-year growth of 6.4% and 2.4%, respectively [15][20]. - For Regency Centers, the 2025 sales and FFO per share estimates imply growth of 5.5% and 5.6%, with recent estimates remaining unchanged [17][19]. - Year-to-date, Realty Income shares have increased by 7.6%, while Regency Centers stock has declined by 5.9%, contrasting with the broader REIT industry decline of 8.5% [20]. - Realty Income trades at a forward price-to-FFO of 13.21X, while Regency is at 14.99X, with both REITs carrying a Value Score of D [20]. Comparative Analysis - Both Realty Income and Regency Centers appeal to income-focused investors through their exposure to essential retail tenants, but Realty Income's global scale and lease simplicity make it a more reliable long-term income stock [22][23].