In a recent announcement from discount retailer Dollar Tree, plans were unveiled to close 1,000 locations, raising concerns about the sustainability of real estate investment trust (REIT) Realty Income's dividend income. However, a closer examination of the situation reveals that the impact on Realty Income may not be as severe as initially feared.

Dollar Tree, a tenant of Realty Income, operates under the Dollar Tree and Family Dollar brands, selling a range of basic items. The closures were announced during Dollar Tree's fourth-quarter earnings report. While the news may appear grim for Realty Income, it's essential to understand how these closures will truly affect the company.

As of the end of December, Family Dollar and Dollar Tree accounted for only 3.3% of Realty Income's total annualized-contractual rent. Realty Income leases 1,229 locations to Dollar Tree and Family Dollar, representing less than 10% of the dollar store's total store count, which exceeds 16,000 combined.

Considering this, the impact on Realty Income is relatively minor, with the company representing just a small fraction of Dollar Tree's overall retail footprint. Furthermore, Dollar Tree's store closures will occur gradually over a multiyear period, allowing Realty Income to continue receiving rent until the lease terms expire. This provides the company with predictable income and ample time to find new tenants.

Realty Income's recent acquisition of Spirit Realty also enhances its position. The deal widens Realty Income's market reach, diversifying its revenue streams and shielding it from potential losses resulting from the Dollar Tree closures. This strategic move demonstrates Realty Income's foresight and ability to adapt to changes in the retail landscape.

Moreover, Realty Income announced its 645th consecutive monthly dividend increase, underlining its commitment to rewarding shareholders. With a long-term occupancy rate of 98.2%, the company has a proven track record of maintaining high occupancy levels for its properties. This historical performance instills confidence in investors regarding the sustainability of Realty Income's dividend.

While store closures are an inherent risk in the retail industry, Realty Income's solid financial position and successful track record suggest that the news from Dollar Tree is more of an attention-grabbing headline than a significant threat to Realty Income's future.

In light of these factors, passive income investors may view the current situation as an opportunity to invest in Realty Income. Its long-standing history of dividend raises and the potential for sustained income make it an attractive option for those seeking stable returns.

Disclaimer: Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.