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Trending: Realty Income Slightly Increases Dividend on Improvement in Rent Collections

Iuri Struta Sep 24, 2020

Dividend.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.

Real estate investment trust Realty Income trended first these past two weeks, partly thanks to an improvement in rent collections. Second in the list is giant U.S. bank JPMorgan Chase, which is bound to post a strong third quarter. Third is telecommunications company AT&T, whose high dividend has attracted users. 3M closes the list, as the industrial conglomerate that does everything saw its sales rise in August.

Don’t forget to read our previous edition of trends here.

Realty Income

Realty Income (O) is first in the list this week with a rise in viewership of 30%. Realty Income has seen an improvement in rent collections for August and slightly increased its monthly dividend by 0.2% to $0.234 per share. This amounts to a forward yield of 4.6%.

Realty Income is renting out properties to America’s largest food and drug retailers, as well as cinemas. Among its top 20 tenants are Walgreens, 7-Eleven, Dollar General and FedEx. Most of these companies did not suffer from the coronavirus pandemic as their businesses were deemed essential and stayed open. However, other tenants include LifeTime Fitness, Regal Cinemas, and LA Fitness, which collectively are responsible for more than 8% of the business. Rent collection from these embattled tenants has suffered – cinemas and fitness clients represent the bulk of uncollected income in August – but not to the extent to put the company in danger.

To boost liquidity, the $20 billion market-capitalization REIT recently said it may raise $1 billion by issuing commercial paper notes, with the proceeds used for general corporate purposes.

For the month ended August 31, Realty Income collected 93.5% of the rent, up from 92.3% in the prior month, and 87.8% in June. The stock has recovered some of the losses it incurred during the March selloff, but the stock remains down 17% year-to-date. It has declined more than 7% over the past five days, together with the broad market.

O Barchart Interactive Chart 09 23 2020

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JP Morgan Chase

The U.S.’s largest bank by asset base JPMorgan Chase(JPM) might report a strong third quarter, but the stock has taken a beating due to broad market jitters and a report that it was among the facilitators of suspicious transactions. The company’s stock has dropped more than 5% over the past five days, extending year-to-date losses to more than 32%.

According to a report from Deutsche Welle, Deutsche Bank facilitated more than half of $2 trillion in suspicious transactions over less than two decades through 2017. JPMorgan is second in that list with around $500 million, followed by Standard Chartered, Bank of New York Mellon, and Barclays. In response, JPMorgan said it reports all suspicious activity to law enforcement agencies and it played an important role in anti-money-laundering efforts.

While the legal implications are still unclear, JPMorgan could have a stronger third quarter than expected. The bank’s chief financial officer Jennifer Piepszak said things look better than she thought, but there is still an enormous amount of uncertainty stemming from the COVID-19 pandemic. Piepszak revised guidance on net interest income down from $56 billion to $55 billion, which is not very bad.

However, a significant rise in coronavirus cases going forward could make the situation much worse, particularly as the banking sector is already hit by a very low interest rate environment.

JPMorgan maintained its dividend at a quarterly $0.90 per share, representing an annual yield of 3.8%.

JPM Barchart Interactive Chart 09 23 2020

AT&T

Highly-indebted telecommunications and media conglomerate AT&T (T) has taken the third spot in the list with an increase in viewership of 26%. AT&T pays an annual dividend of $2.04, amounting to a yield of a whopping 7%. As the company is highly indebted after it overpaid for some large acquisitions, investors might think the dividend is not sustainable. Shares in AT&T have declined around 27% year-to-date.

AT&T has had some good news from its Time Warner division – recently acquired for $85 billion – after HBO won more awards at the 2020 Emmys than any other outlet, beating even arch-competitor Netflix.

AT&T is also working on rolling out its 5G capabilities, a new technology that is expected to revolutionize mobile broadband. Chief Executive Officer John Stankey recently said in the initial phase, people in dense urban areas will be surprised by the speeds, while in more rural areas it would be only incremental improvements.

AT&T is also trying to get rid of DirecTV and reportedly initiated talks over a sale of the broadcast satellite service provider, which has suffered from the cord-cutting trend. AT&T bought DirecTV from $49 billion in 2015. If a deal is reached, it will likely get a fraction of that.

T Barchart Interactive Chart 09 23 2020

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3M

3M (MMM) has seen its viewership advance 25% over the past two weeks, taking the second place in the list.

The industrial conglomerate that does everything from scotch tape to Post It notes to traffic lights, saw its organic sales rise 2% in August year-over-year to $2.7 billion. In the third quarter of 2020, 3M expects revenues of up to $8.3 billion, around $300 higher than the same period last year.

3M pays an annual dividend of $5.76, amounting to a yield of 3.57%. Shares in 3M are down 9% since the start of the year.

MMM Barchart Interactive Chart 09 23 2020

The Bottom Line

Realty Income slightly increased its dividend as its rent collections have improved. JPMorgan Chase is expected to deliver a strong third quarter, but its stock performance was clouded by revelations that it processed dubious transactions in the past. Highly indebted AT&T is looking to undo a 2015 mistake by seeking buyers for DirecTV. Finally, 3M is seeing its results improve as the economy is recovering from the pandemic.

Be sure to check out Dividend.com’s News section for next week’s Market Wrap and other great dividend investing news.

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