Realty Income Charts an Ambitious Path for 2026 Amid Solid Operational Results

Realty Income's Q4 revenue beat forecasts, but AFFO missed. The REIT's 2026 strategy targets $8B in investments, capital diversification, and international expansion.

Realty Income Corporation has presented investors with a narrative of steadfast operational strength paired with aggressive future ambitions. The real estate investment trust (REIT) recently reported quarterly figures that surpassed revenue expectations, though a key profitability metric came in slightly below forecasts. More significantly, management has laid out a detailed roadmap for 2026, emphasizing accelerated investment, capital diversification, and international expansion.

Financial Performance: A Mixed Quarter

For the fourth quarter of 2025, the company generated revenue of $1.49 billion, exceeding analyst projections. However, the Adjusted Funds From Operations (AFFO), a critical measure of cash flow for REITs, registered $1.08 per share, narrowly missing estimates. Net earnings for the quarter stood at $296.1 million, or $0.32 per share.

On a full-year basis, AFFO per share was $4.28. The company posted a net income of $1.1 billion, equating to $1.17 per share for 2025.

A Year of Aggressive Deployment and Portfolio Management

Capital deployment activity was a standout feature of the past year. Realty Income invested a total of $6.3 billion at a weighted average initial cash yield of 7.3%. The pace intensified in Q4 alone, with $2.4 billion deployed at a 7.1% yield, which management described as a noticeable acceleration.

Concurrently, the company actively optimized its property holdings, disposing of 425 assets for approximately $744 million. Operationally, the portfolio remained robust, ending the year with an occupancy rate of 98.9%. Furthermore, on new leases, the company achieved higher rental rates on average, evidenced by a rent recapture rate of 103.9% for the full year and 104.9% in the fourth quarter.

The 2026 Blueprint: Higher Targets and Strategic Expansion

Looking ahead, Realty Income has provided an AFFO per share guidance range of $4.38 to $4.42 for 2026, representing a midpoint growth of approximately 2.8%. A central strategic pillar is a planned increase in investment volume to around $8.0 billion, substantially higher than the 2025 level.

Management's forecast hinges on several key drivers: a reduction in credit losses (40–50 basis points of revenue, down from about 70 basis points in 2025), anticipated income from lease terminations ($30–40 million), same-store rental growth of 1.0% to 1.3%, and occupancy around 98.5%. Property sales are expected to remain near the 2025 level of roughly $740 million.

Broadening the Capital Foundation and Geographic Reach

Financially, Realty Income is diversifying its funding sources. In 2025, it launched a US open-end fund that raised over $1.5 billion from more than 40 institutional investors. This was followed in January by an $862.5 million convertible notes offering (3.500% due 2029). Proceeds were used in part to repurchase approximately 1.8 million shares and to redeem $500 million of 5.05% coupon notes. Year-end liquidity exceeded $4.1 billion, with a net debt to pro forma adjusted EBITDAre ratio of 5.4x.

International growth is becoming more concrete. Through a partnership with GIC, Realty Income announced its entry into the Mexican market, including a $200 million takeout commitment for a US-dollar-denominated industrial portfolio. Initial geographic focus will be on Mexico City and Guadalajara. Additionally, a $1.5 billion US industrial build-to-suit joint venture with GIC is underway, with its first transaction in Dallas ($58.5 million) completed the prior month.

Dividend Consistency and Market Performance

The company's dividend track record remains unbroken. The annualized dividend as of December 31, 2025, was $3.240 per share, a 2.9% increase over the prior year. The AFFO payout ratio for 2025 was 75.2%.

In the market, Realty Income shares have shown resilience, recently trading at €56.44. This price sits just below the recent 52-week high and marks a clear gain since the start of the year. The critical test in the coming months will be whether the company can execute its accelerated 2026 investment plan as outlined, while carefully managing the credit loss and high occupancy assumptions embedded in its guidance.