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Why I Sold Realty Income, And Where I Reinvested The Proceeds

I purchased Realty Income Corporation (O) in December 2013 for $35 per share, adjusted for reinvested dividends. At that time, I felt that Realty Income was a high-quality business on sale. Its nearly 6% dividend yield and cheap valuation were too tempting to pass up.

Since then, Realty Income has blown past my expectations. It has gone all the way back above $50 per share, as interest rates fell and the 10-Year U.S. Treasury dipped below 1.8%. As a result, I was sitting on a nearly 50% return, including reinvested dividends, from a slow-and-steady REIT. While I still believe Realty Income is a strong business, I also believe even great companies can become over-valued.

Its tremendous rally over the past year was due mostly to falling interest rates, which are now starting to creep back up. The better-than-expected jobs report on February 6 caused the yield on the 10-Year Treasury… Read More …