Realty Income Corporation (O) Cash Flow Statement

The dramatic swing in AFFO from $915.7M in 2026Q1 to -$916.1M in 2026Q2 is a red flag, suggesting a massive non-cash adjustment or one-time charge. This contrasts with FFO of $1.0B, indicating that the negative AFFO is not operational but likely reflects accounting distortions. Investors should monitor whether this is a data artifact or a recurring issue, as dividend coverage appears strained in the quarter.

The consistently high FFO/NI ratio, peaking at 5.89 in 2024Q1, highlights that GAAP net income significantly understates cash-generating ability due to non-cash depreciation. This distortion is expected for a net-lease REIT, but the magnitude suggests that investors should focus on FFO and AFFO rather than net income when assessing performance.

The $2.0B capex in 2026Q2 is a significant outlier, as the company typically reports minimal capex (often zero). This likely represents property acquisitions, which are growth-oriented rather than maintenance. The negative FCF of -$812.8M in that quarter is a direct result, but it may not reflect recurring cash flow. Investors should assess whether this investment yields accretive returns.

While OCF comfortably covers dividends in most quarters, the massive capex in 2026Q2 required external funding, likely through debt or equity issuance. This is typical for a growth-oriented REIT, but it increases leverage. The dividend payout ratio relative to AFFO was 0.73 in 2026Q2, but given the negative AFFO, coverage is questionable. Investors should monitor the company's funding sources.