The Siren Song of the Monthly Dividend
Yield is a dangerous drug. For decades, Realty Income (ticker: $O) has marketed itself as the ultimate safety net for income investors. But on this Wednesday, November 19, 2025, the math is starting to break. I have spent the last 48 hours digging through the third-quarter 10-Q filings and the latest yield curve movements. What I found is a company trapped between a rising cost of debt and a stagnant retail environment. The narrative of stability is shielding a more concerning reality: the spread between what Realty Income earns and what it pays to borrow is thinner than a grocery store margin.
Yesterday, November 18, the closing price for $O hit $56.42, leaving it virtually flat for the year despite a broader market rally. While the 5.5 percent dividend yield looks attractive on a screen, it is a mirage when compared to risk-free rates. The 10-Year Treasury yield is hovering at 4.62 percent. This leaves investors with a measly 88-basis-point premium for taking on the massive equity risk of brick and mortar retail. I find this risk-reward profile to be fundamentally broken for a stock that is supposed to be a defensive anchor.
The Great Spread Compression
Realty Income thrives on the spread. They buy a property at a 7 percent cap rate and finance it with 4 percent debt. That 3 percent margin is the engine. However, that engine is stalling. With the latest Fed minutes suggesting that inflationary pressures in the labor market will keep rates elevated through at least mid-2026, the cost of refinancing Realty Income’s massive debt pile is skyrocketing. I am tracking billions in maturing notes that were originally issued at sub-3 percent rates. When those roll over at 5.5 or 6 percent, the Adjusted Funds From Operations (AFFO) growth will fall off a cliff.
Figure 1: The vanishing spread between Realty Income’s Dividend Yield and the 10-Year Treasury (Jan-Nov 2025).
The Tenant Trap
Management loves to brag about their 98 percent occupancy. I call that a lagging indicator. Look at who is paying the rent. A significant portion of Realty Income’s revenue comes from sectors currently under extreme duress. The pharmacy space is a disaster zone. Between the ongoing restructuring at Walgreens and the continued pressure on pharmacy benefit managers, these anchor tenants are no longer the ‘recession-proof’ titans they were in 2015. If a major tenant files for Chapter 11, those ‘triple-net’ leases aren’t worth the digital paper they are signed on.
Top Tenant Concentration Risks as of Q4 2025
| Tenant Name | % of Rental Revenue | Sector Outlook |
|---|---|---|
| Walgreens | 3.4% | Negative (Store Closures) |
| 7-Eleven | 4.2% | Neutral (M&A Volatility) |
| Dollar General | 3.8% | Neutral (Margin Pressure) |
| Dollar Tree / Family Dollar | 3.1% | Negative (Operational Headwinds) |
The Acquisition Machine is Running on Fumes
To grow, Realty Income must buy more property. To buy more property, they must issue stock or debt. With the stock price suppressed at $56, issuing equity is dilutive to existing shareholders. With interest rates at decade highs, issuing debt is expensive. This is the ‘REIT Death Spiral’ in slow motion. I am seeing the company pivot toward international markets and data centers, but these are crowded trades where Realty Income lacks its historical competitive advantage. They are no longer the big fish in a small pond, they are a massive whale trying to turn in a very tight bathtub.
The bull case relies on a pivot that hasn’t arrived. If the Fed does not aggressively cut rates in the first quarter of 2026, Realty Income’s valuation will likely re-rate lower to match the reality of its shrinking growth profile. I am not saying the dividend is at risk of a cut today, but I am saying the dividend growth rate, which has averaged around 4 percent historically, is likely to stall out to a 1 percent ‘token’ increase just to keep the streak alive.
Watch the January 28, 2026, Federal Open Market Committee meeting. If the dot plot does not shift decisively toward 3 percent rates, the pressure on Realty Income’s share price will intensify. For the retail investor, the question isn’t whether $O is a good company, it’s whether a 0.88 percent yield spread over Treasuries is enough to compensate for the risk of a commercial real estate correction. My data says it isn’t.
