Realty Income is attractive despite a 20% five-year share-price decline reflecting no fundamental weakness: AFFO per share keeps growing and is expected to keep growing, supporting dividends. It trades at one of its lowest valuations, yields about 5.95%, and has far outperformed S&P 500 with under half its volatility.

So, this would bring the portfolio's yield to around 6.35% and the weighted 5-year dividend growth rate to above 4%. Now, if we look at the share price over the past year, it's not very impressive.

In reality, people have many complaints about the 20% decline in stock prices in the last 5 years.

However, we need to understand some basic things. Again, as I said before, the reason for the share price decline is not the company's fundamental weakness. In fact, the company continued to grow its Adjusted Funds from Operations (AFFO) per share, which is a key indicator for REITs.

During this period, as I mentioned, Realty Income continued to increase their adjusted funds from operations per share each year. They are expected to maintain this at a good rate in the future as well.

And remember, this is the index on which dividends are paid. So, if it increases, then the dividend also increases at the same time.

Additionally, if adjusted funds from operations per share increases and the share price decreases at the same time, what does this mean? This means we are able to invest at more attractive valuations.

And realty income is currently trading at one of the lowest valuations in the last 5 years. So naturally, this is one of the reasons why they are trading at such high and attractive yields.

They have continued to increase their dividends even though the share price has remained stagnant. And the interesting thing is, historically real estate income, at least since it became publicly traded, has far outperformed the S&P 500.

While this is certainly impressive, what's even more impressive is that they achieved this with less than half the volatility of the market.

The good thing about high-quality REITs is that their cash flows are very predictable, which naturally translates directly into increasing dividend payments. Their total portfolio occupancy rate is approximately 99% and they have a very strong investment-grade credit rating.

These are exactly the kinds of qualities we look for when adding new investments to our portfolio.

For example, if we start with real estate, there is one name that is quite popular and for a reason, and that is realty income. We can allocate about 7% of the portfolio, and currently the realty income yield is about 5.95%, just under 6%, and historically they have grown dividends at about 3.5%.