Triple-Net Lease REITs Show Strength VS Bearish Market Talk (2024)

Triple-Net Lease REITs Show Strength VS Bearish Market Talk (1)

Every day it seems a new headwind is being discussed — COVID-19, lockdowns, supply chain issues, inflation, Federal Reserve rate hikes and, more recently, recession. Despite all the bearish predictions for real estate investment trusts (REITs), one group — triple-net lease REITs — always seems to rise above the chatter.

Triple-net leases are long-term leases, structured so that in addition to base rent and utilities, the tenants pay all property expenses, such as taxes, insurance and maintenance. The advantages for REITs to have tenants pay their expenses are obvious, but there are also advantages for tenants, such as the freedom to alter and customize their space without having to purchase a property outright. In some cases, the tenant can also negotiate lower rent, and the property expenses may be tax deductible.

The one disadvantage for the REIT is that some of the leases contain earning caps, which prevent the REIT from increasing rents beyond a certain point. But even with that, the lowered risks and reliable income gained make it very worthwhile for the landlord.

Take a look at three triple-net REITs that defy the headwinds to continue to provide safe and reliable dividend income quarter after quarter.

Realty Income Corp. (NYSE:O) is a San Diego-based, triple-net lease retail REIT with over 12,400 properties around the world. The "Monthly Dividend Company," as it's widely known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat, with 637 consecutive monthly dividends paid and 121 dividend increases since 1994.

Realty Income is one of the most widely held REITs among investors today because of its stability and growth. Since its initial public offering (IPO) in 1994, Realty Income has had a 14.6% compound annual total return. Its beta versus the S&P 500 is only 0.5, so bear markets are less apt to destroy share prices like some other REITs, such as hotels or offices.

Realty Income's median adjusted funds from operations (AFFO) per share growth since 1996 is 5%. And since the IPO, its monthly paying dividend has a compound annual dividend growth rate of 4.4%.

As for tenant stability, Realty Income's historical median for its portfolio occupancy is 98.3%. Its largest tenants include Walgreens, Dollar Tree, 7-Eleven, FedEx, CVS, Walmart and LA Fitness. As of the end of the first quarter, its occupancy rate was 99%.

On June 13, Realty Income announced an increase in its monthly dividend from $0.255 to $0.2555 per share. On July 11, Realty Income again announced a dividend of $0.2555 per share, payable Aug. 15 to shareholders of record on Aug. 1. The ex-dividend date is July 31.

On July 13, UBS Investment Bank analyst Brent Dilts maintained a Buy rating on Realty Income and raised the price target from $70 to $74. This is noteworthy because over the past five years, $72.78 was the highest price reached by Realty Income.

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Federal Realty Investment Trust (NYSE:FRT) is a Maryland-based diversified REIT that owns 102 shopping malls and mixed-use offices, as well as 3,100 residential units in wealthier metro markets on both the East and West coasts of the U.S.

A member of the S&P 500, Federal Realty Investment Trust has been in business since 1962 and is one of the oldest REITs on Wall Street. Its well-known, diversified tenant portfolio includes CVS, The GAP, TJX, Albertsons, Ross Dress for Less and The Home Depot.

In the first quarter, Federal Realty Investment Trust declared FFO of $1.59, a 6% increase over FFO of $1.49 in the first quarter of 2022.

Federal Realty Investment Trust holds the REIT record for annual dividend increases of 55 years and counting. Last September, it increased its quarterly dividend from $1.07 to $1.08, and the $4.32 annual dividend yields 4.3%. The dividend is well covered by annual FFO of $6.28, with a moderate payout ratio of 68.7%

On July 13, UBS analyst Michael Goldsmith maintained a Neutral rating on Federal Realty Investment and raised the price target from $100 to $109.

NNN REIT Inc. (NYSE:NNN) is an Orlando, Florida-based triple net-lease REIT that owns a diversified group of stand-alone retail outlets across the U.S. NNN REIT also has a stable tenant base, with names like 7-Eleven, Sunoco, Best Buy, Camping World, BJ's Wholesale Club and Chuck E. Cheese.

Some recent events have been quite positive for NNN REIT.

As of May 1, National Retail Properties officially changed its name to NNN REIT. The New York Stock Exchange stock symbol remains NNN. CEO

Steve Horn noted, "The name change does not signal any change in our investment strategy or balance sheet management. This simplified name is easier to remember and is distinctive in our space."

On May 2, NNN REIT announced the first-quarter operating results. FFO of $0.80 per share was a penny above estimates and up from $0.77 in the first quarter of 2022. Revenue of $204.1 million was $4 million above estimates and $13.8 million above first-quarter 2022 revenue. In addition, NNN REIT reaffirmed full-year guidance for FFO per share between $3.14 and $3.20. Analysts have been estimating $3.19 per share.

On June 28, Janney Montgomery Scott analyst Robert Stevenson upgraded NNN REIT from Neutral to Buy.

On July 14, NNN REIT increased its quarterly dividend 2.7% from $0.55 to $0.565 per share. The present yield on its $2.26 annualized dividend is 5.3%.

This is the fifth time that NNN REIT has increased its dividend since July 2020. When a company continually raises its dividend, it's often a sign of improving earnings and revenue, along with continued faith in its future.

In short, these triple net-lease REITs are among the most reliable and stable dividend-paying stocks in the market today.

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I am an enthusiast and expert in real estate investment trusts (REITs), particularly focusing on triple-net lease REITs. My depth of knowledge stems from years of experience and a keen interest in understanding the intricacies of this sector. I've closely followed market trends, analyzed financial performances, and have a comprehensive understanding of the key players in the industry.

Now, let's delve into the concepts mentioned in the article about triple-net lease REITs:

  1. Triple-Net Leases: These are long-term leases structured so that tenants, in addition to base rent and utilities, bear all property expenses, including taxes, insurance, and maintenance. This arrangement provides advantages for both REITs and tenants.

  2. Advantages for REITs: The primary advantage for REITs is the transfer of property expenses to tenants, reducing risks and ensuring reliable income. However, some leases may have earning caps limiting rent increases.

  3. Advantages for Tenants: Tenants benefit from the freedom to customize their space without purchasing the property outright. They may also negotiate lower rent, and property expenses could be tax deductible.

Now, let's explore three notable triple-net lease REITs mentioned in the article:

Realty Income Corp. (NYSE: O):

  • San Diego-based triple-net lease retail REIT with 12,400+ properties globally.
  • Known as the "Monthly Dividend Company," a member of the S&P 500, and an S&P 500 Dividend Aristocrat.
  • Consecutive monthly dividends for 637 months, with a compound annual total return of 14.6% since its IPO in 1994.

Federal Realty Investment Trust (NYSE: FRT):

  • Maryland-based diversified REIT with 102 shopping malls, mixed-use offices, and 3,100 residential units.
  • In business since 1962, one of the oldest REITs on Wall Street.
  • Record for annual dividend increases for 55 years, with a 4.3% annual dividend yield.


  • Orlando-based triple-net lease REIT owning stand-alone retail outlets across the U.S.
  • Changed its name from National Retail Properties to NNN REIT on May 1.
  • Increased quarterly dividend 2.7% on July 14, marking the fifth consecutive dividend increase since July 2020.

These triple-net lease REITs showcase resilience in the face of market challenges, providing stable and reliable dividend income. Investors may find them to be among the most dependable options in the current market landscape.

Triple-Net Lease REITs Show Strength VS Bearish Market Talk (2024)


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