REITs Making a Comeback: 10%-Yielding ONL Stock Beating S&P 500 in 2025
February 3, 2025
Orion Office REIT Outlook Bullish on Industry Tailwinds
Long-suffering real estate investment trusts (REITs) appear to be making a comeback. Higher interest and mortgage rates coupled with a large number of people still working from home have held REIT stocks back.
In 2024, Real Estate Select Sector SPDR Fund (NYSE:XLRE) gained just 5.1%. It continues to do well in 2025, up 2.9%, which is slightly better than the S&P 500’s gain of two percent.
Why the sudden change?
After taking a hit within the higher-interest-rate environment, the valuations of many REITs are now a lot more reasonable. Moreover, if long-term bond yields continue to drop in a lower inflationary environment, the dividend yields on REITs become much more attractive.
The dividend yield on the SPDR S&P 500 is 3.43%. The dividend yields on U.S. 10-Year Treasury Bonds and 30-year government bonds are 4.53% and 4.77%, respectively.
A great REIT with a far superior dividend yield is Orion Office REIT Inc (NYSE:ONL).
Orion is an internally managed REIT that buys, leases, and manages a diversified portfolio of office buildings located in higher-quality suburban markets across the U.S.
The properties are primarily focused on single-tenant net lease offices in markets that are experiencing economic and population growth or in situations where the company believes that dynamics will lead to rising rents.
Orion was recently founded in July 1, 2021, as a result of a spin-off from Realty Income Corp (NYSE:O) following the merger of VEREIT, Inc. with Realty Income. Orion’s portfolio is made up primarily of all the office properties of both companies. (Source: “Investor Presentation November 2024,” Orion Office REIT Inc, last accessed January 27, 2025.)
The REIT’s current portfolio consists of 70 operating properties and six properties through a joint venture. The portfolio covers 8.29 million square feet of rental space. Laid out, this would cover slightly more than 144 NFL football fields.
Orion’s annualized base rent (ABR) per square foot is $14.94 with a weighted average remaining lease term of five years. The portfolio has an occupancy of 74.6% with 74.4% investment grade tenancy by ABR.
The top five geographic areas covered by the REIT’s portfolio include Texas (16% of ABR), followed by New Jersey $13.1%), Kentucky (8.4%), Colorado (6.6%), and California (6.4%).
Some of Orion’s top tenants include Government Services Administration, Bank of America, Merrill Lynch, Cigna, and T-Mobile. The top five industries of its tenants are government and public services (16.4% of ABR), health care and equipment and services (14.7%), financial institutions (12.1%), capital goods (10.3%), and consumer durables and Apparel (7.2%).
Solid Third-Quarter Results
For the third quarter ended September 30, 2024, Orion Office reported total revenue of $39.2 million, down from $49.1 million in the same prior-year period. (Source: “Orion Office REIT Inc. Announces Third Quarter 2024 Results,” Orion Office REIT Inc, November 7, 2024.)
The REIT reported a net loss of $10.2 million, or a loss of $0.18 per share, an improvement from the third-quarter 2023 net loss of $16.5 million, or a loss of $0.29 per share.
Orion’s funds from operations (FFO), a metric used by REITs to illustrate its recurring operating earnings, was $10.1 million, or $0.18 per share. Core FFO, which shows cash flow from core operations, was $12.0 million, or $0.21 per share.
The REIT reported third-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) of $18.9 million and adjusted EBITDA of $19.1 million. Orion ended the quarter with total liquidity of $237.3 million and total debt of $512.1 million.
During the quarter, the REIT acquired one 97,000-square-foot-facility in San Ramon, California, for $34.6 million. The property is fully leased to a single tenant with a remaining lease term of 15 years. For the year-to-date period, Orion has completed 832,000 square feet of leasing.
Subsequent to the end of the third quarter, the REIT closed on one vacant property for a gross sales price of $3.2 million. As of November 7, 2024, Orion also has agreements in place to sell two operating properties for an aggregate gross sales price of $21.5 million.
For 2024, management narrowed its full-year core FFO guidance range to reflect greater certainty for the fourth quarter. The company now expects to report the following:
| Metric | Low | High |
| Core FFO per share | $0.99 | $1.01 |
| General and administrative expenses | $19.5 million | $20.5 million |
| Net debt to adjusted EBITDA | 6.2x | 6.6x |
Quarterly Cash Dividend of $0.10/Share
ONL stock only went public in late 2021, so it doesn’t have a rich history of providing a stable dividend. That said, Orion Office REIT was spun off of Realty Income.
And when it comes to dividends, it’s tough to compete with a company that calls itself “The Monthly Dividend Company,” which has raised its annual dividend for the past 30 years and increased its monthly dividend 128 times since listing on the NYSE in 1994. (Source: “128th Common Stock Monthly Dividend Increase Declared by Realty Income,” Realty Income Corp, December 10, 2025.)
Admittedly, Realty Income is a different beast than Orion Office REIT, but the latter is cut from the same cloth, so chances are that the management at Orion will want to be as diligent and reliable with dividends.
In November, Orion declared a quarterly cash dividend of $0.10 per share, or $0.40 per share on an annual basis, for a current forward yield of 10.36%. Again, ONL stock has only been around for a few years, but it hasn’t missed a dividend payment, plus it has held its payout at $0.10 per quarter.
ONL Stock Up 28% Since April 2024
Orion Office had the misfortune of going public in late 2021, just before the U.S. Federal Reserve began its unprecedented interest rate hikes. Those increases stopped in the summer of 2023, with the Fed slowly lowering them since the summer of 2024.
If you look at the ONL stock chart below, you can see that the decline followed rising interest rates and only began to turn around after the Fed began to lower interest rates. Since April 2024, ONL stock has rallied nearly 28%, up 7.01% year to date. Amidst President Donald Trump’s pro-business policies and general optimism about the U.S. economy, the outlook for REITs like Orion Office remains solid.
It’s tough to predict how REITs will do in 2025, but Treasury Yields should give some sort of indication. REITs could, once again, lag the broader market if inflation heats up and the Federal Reserve opts not to decrease interest rates at all in 2025.
Chart courtesy of StockCharts.com
The Lowdown on ONL Stock
Orion Office REIT Inc has a diversified portfolio that includes headquarters and solid operations properties on long leases and properties on short leases. It successfully leased over 830,000 square feet in the first three quarters of 2024 and added a strategically located facility in California.
Management plants on continuing to execute on its aggressive strategy to reposition the Orion portfolio through asset sales, with 19 properties representing almost two million square feet sold since it spun off from Realty Income in 2021. This does not include its current pipeline of potential sales.
These efforts have helped reduce carrying costs and maintain a low leverage balance sheet that is expected to help support Orion’s much smaller portfolio. This should improve its lending environment and better position the REIT for growth in the coming years.
This repositioning and positive outlook is part of the reason why 311 institutions hold 61.4% of ONL stock. The biggest holder is Vanguard Group Inc, with 9.81% of shares. Other institutions with an interest in ONL stock include Private Management Group (9.18%), BlackRock (8.30%), and Morgan Stanley (2.33%). (Source: “Orion Office REIT Inc., (ONL), Yahoo! Finance, last accessed January 27, 2025.)
