Realty Income stock forms a positive pattern but May 6 will be key

Realty Income (NYSE: O) stock price is holding steady after the Federal Reserve ruled out any interest rate increases this year. It joined other Real Estate Investment Trust (REIT) companies in a strong comeback as it reached a high of $54.9, its highest point since January 24th. It has risen by over 9% from its lowest point this year.

Realty Income is one of the most beloved REITs in the United States. As I wrote recently, it is difficult to see any negative story about the company. Besides, it has been a dividend grower for over two decades, making it a dividend aristocrat. It also pays its dividends every month, making it ideal for retirees and is the biggest net lease company in the world.

Monday will be an important day for the company as it will publish its quarterly financial results. Unlike other REITs, these numbers will be important because Q1 was the first full quarter after the company acquired Spirit Realty in a $9.3 billion deal. 

The company justified the acquisition as being AFFO accretive and having substantial cost synergies. In this, it expects that the combined company will have synergies of about $50 million. It also noted that it shared about 14 of Spirit’s 20 customers. 

Analysts expect that Realty Income’s revenue will come in at $1.2 billion, a 32.60% increase from the same period in 2023. For the year, analysts believe that its revenue will come in at $4.9 billion followed by $5.32 billion in 2023. 

In its most recent results, Realty Income estimated that its net income per share will be between $1.22 and $1.34. Its AFFO per share will be between $4.13 and $4.29 while the occupancy rate will be about 98%.

Realty Income believers expect that the company will continue doing well in the coming years, thanks to its strong occupancy rate. 

Critics, on the other hand, argue that the company has become very big and lost direction along the way. For example, it has grown its global footprint in the past few years. It now has a presence in countries like the UK, Germany, France, Spain, and Italy.

There are also concerns about its historical performance. While the company has a strong dividend yield, it has a long history of lagging the broader market. For example, its total return in the past five years stands at just 1.53% compared to the SPDR S&P 500 ETF (SPY)’s 87%. Its total return this year stands at minus 2.52% against the S&P 500 return of 6.58%.

Realty Income chart by TradingView

Turning to the daily chart, we see that Realty Income’s shares bottomed at $50.52 this year. It formed a quadruple bottom whose neckline was at $54.13. In most cases, this pattern is usually a bullish sign.

The stock has now risen above the neckline at $54.13, its highest point on April 9th. It has also crossed the 50-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) has pointed upwards.

Therefore, there is a likelihood that the stock will continue rising as buyers target the key resistance at $58.78, its highest point in January. That price is about 7.30% from the current level. 

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