This Stock Is Up Over 8,700%, and Still Makes Sense to Own Today

You shouldn't invest in a stock with the expectation of receiving life-changing returns overnight. The S&P 500 -- which is the stock market's main benchmark -- has historically averaged around 10% annual returns over the long haul, so that's typically the more realistic aim for long-term investors.

That said, it's always nice when an investment takes off and provides exceptional returns along the way.

Now, what if I told you that there's a stock that's up over 8,700% -- and is still a buy today. If your mind went to a high-flying growth stock, it'd be a good guess, but you'd be wrong. The answer is actually Realty Income (NYSE: O), a real estate investment trust (REIT).

O Total Return Level data by YCharts

What exactly is a REIT?

A REIT is a company that finances, owns, and operates income-producing real estate. Most of them follow a simple business model: Buy properties, lease them out, collect rent, and return part of that income to shareholders as dividends. By law, they're required to distribute 90% of their taxable income to their shareholders.

REITs focus on all types of real estate, ranging from apartment buildings to industrial facilities to offices to data centers. Realty Income focuses specifically on single-unit freestanding commercial properties.

Unlike shopping centers, malls, offices, and other multi-tenant properties, single-unit tenants cover operating expenses and property taxes, are responsible for capital expenditures, and aren't protected by co-tenancy clauses.

As of the end of the first quarter, Realty Income had over 15,600 properties in 91 industries and eight countries. Notable clients include 7-Eleven, Dollar Tree, Walgreens Boots Alliance, FedEx, and Life Time Fitness.

A dividend that's as reliable as they come

The appeal of Realty Income's stock is undoubtedly its monthly dividend; it accounts for most of the stock's total returns. Since it hit the market, Realty Income's stock price has grown 1,280%. That's not too shabby, but it's a huge difference from the 8,700% returns it has experienced when you account for dividends.

Having a monthly dividend instead of the standard quarterly dividend is ideal for people who need the monthly income for expenses, or want a chance to invest the dividends more frequently, or just prefer a more frequent cash flow.

Here are a few of Realty Income's dividend accomplishments worth mentioning (as of June 10):

• 660 consecutive months of a declared dividend
• Increased dividend payout for the past 111 quarters
• Compound annual growth rate (CAGR) of 4.2%

Realty Income's current monthly dividend is $0.2690 ($3.228 annualized). If it maintains its 4.2% CAGR, you can expect its dividend to double in around 17 years (based on the Rule of 72).

O Dividend data by YCharts

Realty Income has shown that it can be consistent through any economic conditions

Realty Income's dividend is directly tied to how much rent it collects, so it's important that it locks tenants in long-term and keeps its occupancy as high as possible. Its current occupancy rate is 98.5%, and the lowest rate since 1992 is 96.6%, recorded in 2010.

These consistently high occupancy rates are a testament to Realty Income's client base and selection. The company says that roughly 91% of its rent comes from clients that are resilient to economic downturns or e-commerce pressures (think grocery stores, drugstores, convenience stores).

When you're investing in a REIT (or dividend stock in general), the real value is unlocked over time as dividend payouts begin to compound. This means you need a company that can remain consistent through good and bad economic times. Realty Income has demonstrated its ability to do it.

Realty Income estimates that its total addressable market (TAM) is around $14 trillion, leaving a lot more room for future growth. Of course, it won't personally capture the full TAM, but it shows just how massive the opportunity is.

This stock shouldn't be a large portion of your portfolio for diversification reasons, but it can be a great staple for investors who want exposure to the real estate sector.

Should you invest $1,000 in Realty Income right now?

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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FedEx and Realty Income. The Motley Fool has a disclosure policy.