It’s not surprising that my portfolio is primarily comprised of dividend-paying stocks as I am an income investor. I firmly believe that dividend stocks’ rising influence and capacity to generate stable streams of long-term passive income simply cannot be matched.
While there are many excellent dividend stocks available for buyers, here’s why National Retail Properties is now my top pick.
Not just another net-lease REIT
The net-lease REIT leases and owns single-tenant retail buildings in a variety of sectors, including, but not limited to, dining establishments, convenience stores, auto repair shops, and entertainment venues. Currently, its portfolio consists of little over 3,300 buildings that are leased to about 370 tenants throughout 48 states.
Net-lease REITs are reputed to be reliable dividend payers. Companies like Federal Realty Trust and Realty Income both boast dividend growth for the last 25 years or more. This is mostly a result of the net-lease industry’s dependability. However, the acquisition approach of National Retail Properties sets it apart from the competition.
Investment-grade tenants are not directly leased by National Retail Buildings from its properties. Instead, it purchases retail real estate in active real estate markets that is leased to smaller, local businesses. Due to decreased competition, the corporation may purchase goods at more favorable prices.
Acquisitions of investment-grade tenants are made possible by the net leases’ lengthy tenure and National Retail’s meticulous selection of real estate investments. 7-11, Camping World and Mister Car Wash are the top three tenants of the REIT, and together they provide around 13.5% of its yearly revenue. The majority of these businesses, however, have not been directly dealt with by the REIT.
Although it is susceptible to recessionary risks, its susceptibility is lessened by the diversity of its portfolio across the nation and in a broad range of industries. National Retail collected 99.6% of the rent that was due in Q1 of 2022, and its portfolio was 99.1% occupied as of Q2 2022.
Conservative balance sheet
The balance sheet of National Retail is strong, especially when compared to its two closest net-lease competitors, STORE Capital and Realty Income. Its dividend payment ratio is 67% as compared to adjusted funds from operations, a crucial indicator of REIT profitability. This suggests that the business has enough cash to keep paying its dividend and maybe even increase it in the foreseeable future.
Its debt-to-EBITDA ratio of 5.5 is among the best among its nearest competitors and one of the lowest in the net-lease REIT sector. It has a credit grade of BBB/Baa1, and it has $30 million in liquid assets to fulfill the debt maturities due in 2023. Additionally, it is the greatest value purchase among its net-lease competitors due to its price, which is 15.5 times AFFO.
It is simple to pay dividends, but it is far more difficult to preserve and increase them without sacrificing shareholder value. Therefore, it truly speaks something about a company’s quality of business when it can regularly grow dividends over many years.
National Retail Properties is the equivalence of a Dividend Aristocrat due to its 33-year streak of dividend increases. It increased its payout by 72% during the previous 20 years, giving it a 5% dividend yield today—more than double the S&P 500’s.
Additionally, it has delivered a roughly 11% annualized total return over the previous 25 years, outperforming the S&P 500. National Retail Properties is an obvious long-term winner for dividend investors and a fantastic bargain buy right now given its superb dividend track record, capacity to grow its portfolio, and recent stable performance.