This month we received a monthly dividend payment from Realty Income Corp (O) in the amount of $43.99 (220.524 X .1995 cents) which we promptly used to buy more shares of O through our DRIP program. O happens to be the only company in our Quantigence portfolio that pays us monthly instead of quarterly like all other 29 stocks we hold. This monthly payment actually reflected a minute raise of .25% which is barely even noticeable. Now before we get all upset, let’s just reflect for a moment on how well O has been performing.
We first started buying O in June of 2014 and then pulled the trigger in May-Jun of 2015 on some pretty large buys as we went against our own advice and decided to try and time the market. Turns out this wasn’t the worst idea and now we’re sitting on a position in O which is valued at around $16,000 which is a bit more than our target position size of $13,333 for each stock in our portfolio. One of the reasons for this is that we’re sitting on paper gains of around 52% for O. This means we’ve only invested about $10,400 so far yet the position is the heaviest weighted in our entire portfolio.
So what we’ve done with O is obviously we’re not buying any more except for the monthly dividend payments which we will continue to DRIP. Let’s say O happens to drop 30% and our position size drops to $11,135. We’ll happily resume buying shares of O to bring that position size back up to $13,333. Even at current value, our position is still less than 4% in a fully vested $400,000 portfolio. If one of our positions hits 5%, then we’ll take a look and consider trimming it. We could also redirect dividends paid, or even increase our investments in other positions across the board to reduce the weighting. We want to let our winners run, but at the same time we’re also expecting our entire portfolio to rise and fall alongside the market.
In this case, we know that REITs act as an alternative asset class in equity portfolios and decrease their correlation to the overall market over time. This means that at the moment REITs are outpacing all of our stocks except maybe utilities. While many investors are speculating that REITs will fall, we’re happy either way. If O drops, we’ll happily buy more. If it goes up, we’ll pat ourselves on the back and proclaim what geniuses we are for “buying at the bottom”. If it goes sideways, we’ll happily continue to collect our monthly dividends.