Will the stock market crash? Who knows? That’s why I own this high-yielding dividend stock.

We had quite the historic month. A gunman nearly assassinated a former president, while the current commander-in-chief shockingly revealed he would not seek re-election.

The two events are adding to the country’s growing economic uncertainty, which is already fueled by persistently high inflation and interest rates. They are also fueling growing fears that the stock market could crash (it had its worst day in years this week).

I have no idea if a crash will happen. However, I have taken steps to prepare for it if it does. I have cash on the sidelines and a few defensive stocks in my portfolio to soften the blow, such as Real estate income (ABOUT 1.24%). This is why I think his Excellent investment in times of uncertainty.

Solid underlying return

Realty Income lives up to its name. Real estate investment fund (REIT) pays a very sustainable dividend. It recently announced its 649th consecutive dividend monthly dividend.

The company has raised that payout 126 times since going public in 1994 (30 consecutive years), including the last 107 consecutive quarters. During that time, it has increased its dividend by 4.3% annually.

The REIT’s current dividend is 5.5%, which is several times higher than the dividend S&P500 1.3%. Such a high payout provides investors very solid underlying rate of return.

The dividend is based on very solid foundations. The company generates very stable cash flow, supported by long-term net leasing. Meanwhile, the REIT’s dividend payout ratio is conservative: less than 75% of adjusted funds from operations (FFO).

Up all of which is one of only eight REITs in the S&P 500, with two investment-grade bond ratings A3/A- or better. The company’s strong financial position helps protect it during market declines.

Lower volatility

The combination of stable earnings and a solid dividend makes Realty Income one of the least volatile stocks in the S&P 500:

Its beta is 0.5, meaning it is half as volatile as the broader market. It also has an excellent record of growth in more difficult economies. Realty Income has posted positive earnings growth in 27 of the past 28 years (the only exception being the financial crisis). It was one of the few REITs to post positive earnings and dividend growth during the pandemic in 2020.

The company is In strong position to continue delivering during the next downturn. About 90% of rent comes from tenants in industries that are recession-proof or insulated from the pressures of e-commerce, such as grocery stores, convenience stores and dollar stores.

Visible growth

The REIT should have no problem continuing to grow through the next market crash. Built-in rent drivers, such as rent escalators, along with acquisitions that it can internally fund with retained cash after dividends, should add about 2% to FFO per share each year.

At the same time, it has sufficient balance sheet capacity for external financing of acquisitions. It is estimated that each billion dollars of investment financed from external sources will increase FFO by approximately 0.5% per share each year. We conservatively forecast FFO per share growth of 4-5% per year, after taking into account internal and external factors.

Realty Income has already secured a solid base growth rate this year. Earlier this year, it completed the $9.3 billion acquisition of Spirit Realty, and that transaction alone is expected to add more than 2.5% to FFO per share IN 2024. Add in rent growth and plans to complete an additional $3 billion in acquisitions this year, and the REIT is on track to grow FFO per share by more than 4% despite interest rate headwinds.

Portfolio Stabilizer

Realty Income shares aren’t immune to market crashes, but their lower volatility suggests they won’t fall as sharply as the broader market during a crash. In the meantime, they offer an attractive underlying yield from dividend income that should continue to grow.

These factors should help ensure stability during future market storms, Which is why My portfolio has a growth position in this high-yielding REIT.

Matt DiLallo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.