Typically, investors look at a company’s dividend payout ratio to determine the sustainability of the dividend being paid. This ratio is usually calculated based on net income. As a real estate company, there is a supplemental measure to net income that can be used to measure a real estate company’s ability to generate cash flow to pay dividends. That measure is "adjusted funds from operations available to common stockholders," or AFFO. Most research analysts in our industry track AFFO to provide an additional assessment of dividend-paying ability. The AFFO calculation adds back non-cash depreciation, and deducts property sales gains from net income, while adjusting for other unique revenue and expense items that are not pertinent to measuring ongoing operating performance. To further illustrate:
What net income does:
How Depreciation Works:
How we calculate AFFO:
You can learn more about how AFFO is calculated by viewing our Adjusted Funds from Operations document
Past performance is not a reliable indicator of future performance. The price of Realty Income shares may go down as well as up and you may not get back all or any of your original investment.
Dividends are not guaranteed. They are paid only when declared by our Board of Directors after reviewing our financial condition. View Risks for more information.