REIT Investing: Dividend Growth Is Key With REITs…
Just the other day I was looking at my trading account. I noticed something interesting… a lot of my returns in the last few months have come from dividends.
Now this isn’t a mistake.
Over the last few years, I’ve made it a habit to stock up on great dividend paying stocks especially during market corrections. They provide stability in times of volatile market action and it provides a nice stream of income.
The crazy market action over the last few weeks may have thrown more than a few investors for a loop… but for me it was a great buying opportunity.
During some of the biggest drops, I was able to buy a handful of great stocks, all paying fat dividends… at depressed prices. For me it was a nice win.
But what’s more important, I spent a good deal of time researching new companies.
I truly believe it’s important to have your eye on the market. And the best way to do that is by having a stable of companies on your watch list.
The reasoning is simple, by following a basket of interesting companies, you have a good idea what’s going on. It gives you a good look into a wide variety of industries. And, if the market does present you with a great buying opportunity (like last week), you’re not wondering what to do.
You’ve already identified a few great companies.
The newest addition to my watch list is a REIT called National Retail Properties (NNN).
What’s so special about NNN?
I’ll get to that in a minute, but first, let’s look at their business. National Retail Properties strategy is very simple. They buy or build single tenant buildings. No strip malls or big shopping centers here.
They buy single buildings with a particular tenant in mind… think places like stand alone fast food restaurants, pharmacies, or retail stores. You may have been in one of their buildings and not even known it.
Since the buildings are specialized to a particular occupant, tenants are willing to sign long term leases. Not only do the tenants pay rent, but they also take care of the property.
NNN specializes in what’s called a “triple net lease”.
If you’ve ever tried to rent a commercial building, you know all about it. For those who don’t, a triple net lease passes along all the costs of the building to the tenant. Things like maintenance, insurance, utilities, and even taxes are all paid by the tenant!
This is a fantastic strategy for NNN as they don’t have a ton of operating expenses tied to their various properties.
Now, National Retail Properties isn’t some newcomer either. They have over 1,248 properties located in 46 states. That’s more than 13.6 million square feet of leasable space. Best of all, their occupancy rate is a staggering 96.9%…
But that’s not why I like this company so much.
Nope. One of the things that caught my eye was the cash on cash returns the company is throwing off. Right now, the quarterly dividend is $0.385 per share… those of you quick on the math realize for every share you own you’ll receive about $1.54 in dividends per year.
That’s a 6.2% yield.
You won’t find that kind of yield at any bank.
The high dividend is fantastic, but here’s what really got me excited about NNN…
Every year for the last 22 years, NNN has increased their dividend.
Let me say that again… the board of directors of NNN has increased the dividend every year for 22 straight years! Twenty-two years of dividend growth… it’s a proud record that the management team isn’t shy about highlighting.
Back in 2000, you could have picked up this stock for right around $10 a share. Over the next 10 years, the dividend’s jumped from around $1.25 a year to over $1.54 a year. By now you would have earned back all of your initial investment – and then some.
Best of all, the stock more than doubled in price over the same time period.
So will the next 10 years be just as good? I don’t see why not. The dividend track records in place and the company is certainly heading in the right direction. This is one stock I’m definitely keeping my eye on.
Category: Real Estate
