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we're a very strange moment here federal reserves committed to cutting short-term interest rates but long rates set by the bond market have soared and that's holding back all sorts of stocks especially the high yielders that most directly compete with bonds take realy income Corp the real estate investment trust that owns more than 15,000 properties mostly retail Focus this re is famous for its reliable monthly dividend payments which currently yield more than5 .5% sub substantially better than you get for the bond market however the stock would be a lot more enticing if long rat were going down rather than going up both don't forget these guys have are D dividend Aristocrat reality income rallied 20% in the third quarter anticipation of that First Rate cut from the FED but as long rates have climbed relentlessly in October and November the stock that's been crushed didn't seem to matter that re reported a very solid quarter early last week even raising its full year forecast so what do we do with this high quality dividend stock now that it's pulled back from its highs let's check was suit Roy and he's the president and CEO of real income to get a better sense of What's Happen Mr Roy welcome back to M Mone thank you very much for having me Jim okay so help me here you know you just reported great numbers the dividend safe keeps being raised many many years we love the monthly dividend we look at the stock and we presume that there must be something wrong could you please explain to people that it has much more to do with the with long rates than it has with your portfolio oil exactly right Jim um the exogenous factors here is absolutely the 10-year treasury um even if you just look at what's happened over the last six seven trading days uh post elction results um it's um it's it's trying to find where the settling out period is going to be and it's gone up about 30 40 basis points uh during that period which obviously has an impact on our stock you know the things that we can control uh like you said in your introduction our ability to continue to perform regardless of the volatility that we are experiencing that's what this company has built on um we are a highly Diversified 80 billion plus Enterprise Value company that believes in in in distributing dividence and we've done that since our listing in '94 every year and um I think this to will pass um the market is trying to adjust what are the policies that uh will come through what are the priorities of this policy and what's going to be the inflation expectation uh longer term and as soon as that happens um I do believe that that backdrop will be very conducive for us to continue to perform well I have to believe that historically the relation between uh say the longer term uh Bond and you is such that if you bought it when the stock broke down and this has happened twice to me with your company in the last decade it has always been the right thing to do and I'm therefore presuming at least historically it would be the right thing to do again yeah you're absolutely right in the rising interest rate environment which is what we experienced you know from 96 to to almost 2006 in that time frame the tenure was Trading North of 5% wasn't necessarily a rising interest rate environment but it was an elevated 10year treasury um we continue to perform uh we grew our afo per share which is appr proxy for our earnings at a 5% level then in an environment when you look at 2008 to to 2022 two where the tenure was somewhere in the you know Slightly North of 2% we still continue to perform uh and and and generate earnings nor of 5% so for us it's not really where the treasury um the 10e treasury ends up you're right in the short term there's an inverse correlation it's just once that volatility is out of the market and we have a stable backdrop to execute on transactions um that's what we are able to do and so uh like I said there's a bit of a feeling out process by the market to to absorb what are the policies that are going to dictate the next three to four years and once that happens um I think we'll be in a good place to continue to to be that net lease company of choice all right so let's be sure that some people are saying to me Jim you're whistling fast the gra graveyard they've got a big position uh tenant position with with Dollar General big with uh with Walgreen big with Dollar Tree these are no longer the kinds of credits that you want um how do you respond to that you know for me there are the headlines um and and we discussed this during our earnings call last week where they talk about $600 uh Walgreens stores closing down and the reality of of the situation is we had 13 Walgreens coming uh you know had lease expirations this year and all of them uh were were sort of renewed and so uh it's a similar story with with our Family Dollar situation uh in our history we've had more than 100 leases renew and we've recaptured nor of 106% 107% uh renewal spreads and so you know the reality does not sort of match up with the headlines it is true that family drawler as a brand uh is is going through some some growing pains and um you know that was one of those uh um m&a transactions that Dollar Tree did which hasn't sort of come to pass and but that too is going through a repositioning and I think we've we've touched on this before uh in your show Jim you know we buy assets that we believe has a slew of alternative tenants ready to come in and even in a situation where we do get back uh assets we're very confident in our ability to reposition it and that's that's been the case on some of the Family Dollars um that that we've actually proactively approached Family Dollar and said you know can we have those back and uh because we've had a couple of um very large National retailers who want to step into that position and so uh we feel very confident about our ability to continue to uh to produce results uh regardless of some of these headlines that dominate U you know the news well I'm so GL you said that I to me it's just been entirely L the 10 year very very rarely you get this kind of break to be able to buy your stock which is a straightup stock I want to thank Sumit Roy he's the president CE of realy income letter O monthly divid divid a risk out for more than 25 years May M's back here break
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