We Think Realty Income Corporation's (NYSE:O) CEO Compensation Looks Fair

By
Simply Wall St
Published
May 11, 2021
NYSE:O

The performance at Realty Income Corporation (NYSE:O) has been quite strong recently and CEO Sumit Roy has played a role in it. Shareholders will have this at the front of their minds in the upcoming AGM on 18 May 2021. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. We think the CEO has done a pretty decent job and we discuss why the CEO compensation is appropriate.

See our latest analysis for Realty Income

How Does Total Compensation For Sumit Roy Compare With Other Companies In The Industry?

Our data indicates that Realty Income Corporation has a market capitalization of US$25b, and total annual CEO compensation was reported as US$7.8m for the year to December 2020. That's just a smallish increase of 3.6% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$900k.

In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$7.8m. So it looks like Realty Income compensates Sumit Roy in line with the median for the industry. What's more, Sumit Roy holds US$9.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary US$900k US$850k 12%
Other US$6.9m US$6.7m 88%
Total CompensationUS$7.8m US$7.5m100%

On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. Realty Income sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
NYSE:O CEO Compensation May 12th 2021

A Look at Realty Income Corporation's Growth Numbers

Realty Income Corporation has seen its funds from operations (FFO) increase by 12% per year over the past three years. It achieved revenue growth of 8.3% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Realty Income Corporation Been A Good Investment?

We think that the total shareholder return of 46%, over three years, would leave most Realty Income Corporation shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus in the AGM. However, investors will get the chance to engage on key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 4 warning signs for Realty Income (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.

Important note: Realty Income is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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