Realty Income

Methodology

This EPS-based method has fundamental limitations for Realty Income as a REIT, since depreciation distorts reported earnings despite stable cash flows from net lease properties. Investors should use FFO or AFFO-based models instead, which better capture the economic reality of the monthly dividend company. The predictable nature of triple-net lease income makes cash flow-based valuation straightforward.

Methodology

Traditional PEG analysis is problematic for Realty Income given GAAP depreciation distortions in reported EPS. If using PEG, substitute AFFO growth for EPS growth to get meaningful comparisons against retail REIT peers. The metric may still undervalue the stability premium investors assign to Realty Income's high-quality tenant base and monthly dividend consistency.

Methodology

PEGY is more relevant than standalone PEG for Realty Income given the substantial dividend yield central to the investment thesis as the monthly dividend company. Incorporating yield into valuation captures total return potential from reliable monthly income plus modest growth. For this income-focused REIT, dividend sustainability and growth matter as much as FFO expansion.