With 31 years of dividend raises, National Retail Properties (NNN) has achieved Dividend Aristocrat status — surviving and thriving through several recessions without even pausing their dividend, asserts Rida Morwa, income expert and editor of High Dividend Opportunities.
Today, the "triple-net" REIT's business is stabilizing, and the outlook for growth in 2021 is bright. Investors can get a 5.4% yield today and enjoy great capital gain potential as well as annual dividend growth.
"Triple-net" refers to a type of lease where the majority of the expenses are the responsibility of the tenant. The tenant pays for property taxes, building insurance and maintenance of the property.
For the landlord, this means an investment that produces regular rent with minimal capex needs and inflation risk is on the tenant. For tenants, they benefit because triple-net leases have lower rent and they have more freedom with what they do with the property.
Meanwhile, one common form of acquisition for NNN is the "sale-leaseback." This means that the tenant sells the building to NNN and then leases it back. The tenant frees up a lump sum of capital that was tied up in the building in exchange for an obligation to pay rent. They can then use that capital to expand their own operations.
Historically, 71% of NNNs investments have been based on existing relationships. This model has been very successful for NNN, allowing them to leverage their relationships and have a steady flow of new deals with tenants that have been reliable.
The reason why NNN is trading so cheap right now is not a secret. The impact of COVID-19 is reverberating throughout the economy.
NNN has over 300 different tenants and it's inevitable that some of them are going through bankruptcy. In Q3, the REIT reported that 90% of rent was collected, 5% was deferred and the remainder was unresolved or in negotiation.
For shareholders, NNN has consistently rewarded them with dividend raises. We can enjoy a 5.4% yield today, with confidence that our income stream will grow annually. At the current price, buy NNN and never let go. It is set to be the biggest winner in your high-yield portfolio.
