REIT sell-off puts Realty Income and Agree Realty yields in the spotlight

By Julia Santos · Founding Editor, DividendsTimes

Educational analysis, not personalized investment advice.

A fresh wave of selling has hit real estate investment trusts as bond yields climb, and two of the most widely held net lease names, Realty Income (O) and Agree Realty (ADC), are caught in the downdraft. For income-focused investors, the REIT sell-off is raising a familiar question: is this a warning or an invitation? According to Motley Fool, yields on both stocks have risen enough to attract serious attention from long-term dividend buyers.

Why REITs are under pressure again

The mechanics are straightforward. When Treasury yields rise, income investors can earn more from risk-free government bonds, which makes the comparatively riskier cash flows from REITs less attractive on a relative basis. Sellers push REIT prices down until the dividend yield compensates for that gap. The pattern has played out repeatedly since the Federal Reserve began its tightening cycle, and the latest move in the 10-year yield has renewed the pressure.

Net lease REITs like Realty Income and Agree Realty feel the effect more than most. Their business model, owning freestanding commercial properties leased to single tenants on long-term contracts, produces steady but relatively slow-growing income. That predictability is a strength in calm markets, but it also means these stocks compete more directly with bonds for investor dollars.

Realty Income: the dividend heavyweight

Realty Income is the larger of the two by a wide margin. The company owns thousands of properties across the United States and Europe, leased to tenants ranging from convenience stores and pharmacies to dollar stores and grocery chains. It pays a monthly dividend, a feature that has made it a staple in retirement portfolios for decades. The stock carries a Dividend Aristocrat pedigree, having raised its payout for more than 25 consecutive years.

With the recent pullback, Realty Income’s forward yield has climbed well above its five-year average, which tends to signal an attractive entry point for patient buyers. The company’s balance sheet remains investment-grade, and occupancy rates have historically stayed above 98%.

Agree Realty: smaller but faster-growing

Agree Realty is a fraction of Realty Income’s size, but it has been one of the more aggressive acquirers in the net lease space in recent years. The company focuses heavily on investment-grade tenants, with a portfolio weighted toward essential retail categories like grocery, home improvement, and tire and auto service. That tenant quality gives it a defensive profile that holds up well during economic slowdowns.

Agree Realty also pays a monthly dividend and has delivered consistent distribution growth. Its smaller scale means it can pursue acquisitions that would barely move the needle for Realty Income, giving it a longer runway for external growth. The trade-off is a somewhat thinner margin of safety if credit markets tighten further.

Choosing between the two

The decision often comes down to priorities:

• Yield and stability: Realty Income generally offers a higher current yield and a longer track record of dividend increases.
• Growth potential: Agree Realty’s smaller base and acquisition pace could translate into faster dividend growth over the next decade.
• Diversification: Realty Income’s larger, more geographically diverse portfolio provides a wider safety net.

Neither stock is immune to further selling if rates keep climbing, but both have the balance sheet strength and tenant quality to ride out a prolonged period of elevated yields without cutting their dividends.

What to watch

The direction of the 10-year Treasury yield will remain the single biggest driver of REIT sentiment in the near term. Any sign that the Fed is preparing to ease policy, or that inflation data is softening enough to justify a pause, could trigger a sharp rebound in the sector. Investors should also monitor quarterly earnings for occupancy trends and acquisition activity, particularly at Agree Realty, where deal volume has been a key part of the growth story.

Frequently asked questions

Why are Realty Income and Agree Realty falling during this REIT sell-off?

Both stocks are net lease REITs that produce steady, bond-like income. When Treasury yields rise, investors can get competitive returns from government bonds with less risk, so they sell REITs until the dividend yield gap widens enough to compensate. Realty Income (O) and Agree Realty (ADC) are particularly sensitive to this dynamic because their long-term lease structures deliver predictable but moderate growth.

Is Realty Income or Agree Realty the better buy right now?

It depends on what an investor values most. Realty Income offers a higher current yield, a larger and more diversified portfolio, and a 25-plus-year streak of annual dividend increases. Agree Realty provides faster potential growth thanks to its aggressive acquisition strategy and smaller asset base. Both maintain investment-grade balance sheets and high occupancy, so the choice is largely between income today and growth over time.

Could either company cut its dividend if rates stay elevated?

A dividend cut looks unlikely for either name in the current environment. Realty Income’s occupancy has historically held above 98%, and Agree Realty’s tenant roster skews heavily toward investment-grade credits in essential retail. Both companies generate enough cash flow to cover their distributions with room to spare, even if borrowing costs remain elevated for an extended period.

Educational analysis, not personalized investment advice.