Top Net Lease REITs: Safe Dividend Investments for Your Portfolio

When it comes to high-yield dividend stocks, real estate investment trusts (REITs) are a great starting point. These companies are structured to pass along income to shareholders with substantial dividend payments, but not all REITs are created equal. Net lease REITs, such as Realty Income (NYSE: O), W.P. Carey (NYSE: WPC), and NNN REIT (NYSE: NNN), stand out as some of the safest options for income. Here’s why this trio might ensure peace of mind for years to come while you enjoy healthy dividend payouts.

Understanding Net Lease REITs

Owning a rental property typically means collecting rent but also handling maintenance and taxes. Net lease REITs, however, transfer many of these responsibilities to the tenants. Interestingly, this arrangement benefits both parties: landlords avoid the costs associated with upkeep, while tenants often enjoy more straightforward operating arrangements.

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Net lease transactions often involve a sale/leaseback process. A company sells a property it needs for operations but continues using it by leasing it back, thus raising cash for growth or debt reduction while retaining control over the asset. In this scenario, net lease REITs acquire properties that enhance their cash flows with tenants who are typically committed to maintaining their businesses. While single-tenant properties can be risky, owning a diverse portfolio significantly lowers that risk.

Examining Realty Income, W.P. Carey, and NNN REIT

Among this group, Realty Income is the largest, boasting a market cap of $55 billion and a dividend yield around 5%. For perspective, the average REIT yields about 3.7%. Realty Income has a remarkable track record, having increased its monthly dividend for 29 consecutive years. Its large scale offers access to capital markets, allowing it to actively secure valuable properties while remaining profitable.

The REIT’s portfolio comprises over 15,400 properties across North America and Europe, with a focus on retail (73% of rents) and industrial assets (17%). This diversity allows the company to adapt and grow steadily over time.

NNN REIT follows a similar pattern but is more specialized, owning about 3,500 retail properties in the U.S. Notably, it has raised its dividend for 35 consecutive years, with a current yield of about 4.8%. It has cultivated long-term relationships, with roughly 72% of acquisitions stemming from previous partners. This model allows NNN REIT to facilitate quick deals, yielding better investment returns compared to market purchases.

W.P. Carey commands attention for its yield of 5.9%, despite having recently cut its dividend due to a strategic exit from the office sector. This dividend reset, however, positioned the REIT for better future prospects. Its portfolio, containing around 1,300 properties, favors industrial assets (about 64% of rents), with retail making up 21% and other sectors comprising the remaining share. The recent shift frees up capital for new investments and enhances growth potential moving forward.

Reliable REITs for Steady Income

Realty Income, W.P. Carey, and NNN REIT represent solid investment choices for those seeking consistent dividends. While W.P. Carey has an unusual dividend history, understanding the strategic significance of its reset can provide clarity on its long-term value. Investing in any of these three REITs can pave the way for a steady income stream, allowing you to rest easy at night.

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Reuben Gregg Brewer holds shares in Realty Income and W.P. Carey. The Motley Fool has positions in and recommends Realty Income and the Vanguard Real Estate ETF. The Motley Fool’s disclosure policy is available for review.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.