Real estate income (NYSE:O) is one of the more popular real estate investment trusts (REITs), and iIt’s easy to understand why. The company has been a dividend-paying machine over the years. It has paid 651 consecutive monthly dividends. It has increased its payout for 108 consecutive quarters – and a total of 127 times since going public in 1994 – and has delivered compound annual dividend growth of 4.3% over the past thirty years.
Income-oriented investors who like Realty Income’s steadily rising payout should check out Colleague REIT NNN REIT (NYSE: NNN). The company recently achieved a dividend growth milestone, putting it in a… terribly select group. This is why it’s different Great option for those looking for a growing stream of passive dividend income.
An elite REIT
NNN REIT recently achieved a rare milestone. It achieved its 35th consecutive annual dividend increase. Only two other REITs and fewer than 80 publicly traded companies have reached that level.
Consistency and conservatism have come into play key role in the performance of the REIT one like that reliable dividend growth. NNN REIT has a very simple one and targeted investment strategy. Investments are only made in triple net lease with one tenant (NNN) shop premises. This rental structure, which Realty Income also uses, requires tenants to cover everything by the running costs of a property, including routine maintenance, building insurance and property taxes. This ensures a very predictable stream of rental income.
It is not just a storefront that is purchased. It focuses on well-located properties in strong markets, making it easier to replace tenants as needed and driving rental growth. It also has a well-diversified real estate portfolio (almost 3,550 locations rented to 375 national and regional retail tenants in more than 35 trade lines). While not as diversified as Realty Income (15,450 properties rented to more than 1,550 clients in 90 industries around the world retail, industrial and gaming sectors), it has built a high-quality portfolio of income-generating retail properties.
NNN REIT also has a conservative financial profile. It has a low dividend payout ratio of around 70% of core money from operations (slightly lower than Realty Income’s 73.3% in the second quarter). It also has a terribly conservative balance sheet, with an industry leading weighted average debt maturity of 12.6 years. While its credit rating isn’t as high as Realty Income’s, it has a very healthy balance sheet.
The space to grow
NNN REIT’s conservative financial profile gives it the flexibility to continue investing in income-generating retail properties. It builds relationships with growing national and regional retailers. That allows it to steadily buy properties from them sale-leaseback transactionsallowing its retail partners to do so recycle that capital back in expanding their footprint. Approximately 72% of acquisition volume historically came through existing relationships. These investments usually have a higher value maximum rate for real estate than market/auction agreements.
The REIT invested $235 million in positive deals to acquire 36 properties in the first half of this year. It has proactively raised additional capital, including by selling 20 properties for $85.8 million, to take advantage of future investment opportunities.
NNN REIT believes it can grow its core FFO per share at a mid-single-digit annual rate in the future by continuing to make acquisitions (a similar growth rate to Realty Income). Therefore, it should be able to continue increasing its dividend.
Another great way to collect passive income
Realty Income is a leading REIT for those looking for a steadily increasing dividend. However, it is not the only option. NNN REIT has an even longer track record of increasing its dividend It seems likely to continue expand in the future. So if you’re looking for another income option (it offers a similar dividend yield to real estate income of around 5%), NNN REIT is a good choice. The targeted investment strategy and conservative approach have done just that Real has paid dividends to its investors over the years.
Should you invest $1,000 in NNN REIT now?
Consider the following before purchasing shares in NNN REIT:
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Matt DiLallo has positions in Realty Income. The Motley Fool holds positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
If you like the steadily rising dividend of real estate income, you’ll love this nearly 5% yielding stock originally published by The Motley Fool
