Investors seeking a reliable source of passive income often turn to Realty Income, a stalwart in the real estate investment trust (REIT) space. With a remarkable 651 consecutive monthly dividend payments and 108 straight quarters of dividend growth, it’s easy to see why. However, there’s another REIT that’s worth considering for those who appreciate a steadily rising dividend stream: NNN REIT.
This REIT has recently achieved a significant milestone, boasting 35 consecutive years of annual dividend increases – a feat accomplished by only two other REITs and fewer than 80 publicly traded companies. NNN REIT’s success can be attributed to its conservative approach and focused investment strategy.
Unlike some REITs, NNN REIT concentrates solely on single-tenant triple net lease retail properties, which provide a predictable stream of rental income. Tenants are responsible for covering operating costs, including maintenance, insurance, and taxes, allowing NNN REIT to generate a stable revenue stream. The company is selective in its property acquisitions, targeting well-located assets in strong markets, making it easier to replace tenants and drive rent growth.
NNN REIT’s portfolio consists of nearly 3,550 properties leased to 375 national and regional retail tenants across 35 lines of trade. While not as diversified as Realty Income, its portfolio is of high quality and generates a substantial income stream.
The REIT’s financial profile is also conservative, with a low dividend payout ratio of around 70% of its core funds from operations. Its balance sheet boasts a sector-leading 12.6-year weighted average debt maturity, providing the flexibility to continue investing in income-generating retail properties.
NNN REIT builds relationships with growing national and regional retailers, enabling it to acquire properties through sale-leaseback transactions. This approach has resulted in a higher real estate cap rate than market/auction deals. In the first half of the year, the REIT invested $235 million in accretive deals, acquiring 36 properties, and proactively raised additional capital to capitalize on future investment opportunities.
With a focus on making accretive acquisitions, NNN REIT believes it can grow its core FFO per share by a mid-single-digit annual rate, supporting continued dividend growth. Offering a similar dividend yield to Realty Income at around 5%, NNN REIT presents an attractive option for income-focused investors.
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