Owning REITs With Consistently Growing Dividends Is A Proven Strategy

Written by ContrarianOutlook.com

…Owning high-quality REITs (real estate investment trusts) with track records of consistently growing dividends is a proven strategy that delivers income today and rewards you with attractive gains for retirement, too…[This article] considers three well-known REIT names to show how dividend growth can drive price appreciation, and generate outsized returns. There is no magic formula. It really boils down to common sense. A dividend cut or stagnant pay-out can spell disaster, while a growing dividend rewards investors…

It is important for REITs to generate extra cash on top of the money they pay out in dividends each quarter. That is why there is an old saying: “The safest dividend is the one that was just raised.”

REITs own…properties like convenience stores and drugstores, where the leases are signed for ten, fifteen or even twenty years and some are even net-lease…REITs that can also grow earnings from contractual rent increases that help keep up with inflation.

But, the news gets even better…[REIT] leases are usually “triple-net,” [in that,]:

in addition to monthly rent,

creditworthy tenants pay all the taxes, insurance, utilities,

and most building maintenance.

No fuss, no muss. It is cash flow investors can count on.

…Three of the most popular…[large cap net-lease REITs are:]

Realty Income Corp. (O) – $16.8 billion market cap, 4.1% dividend yield.

VEREIT, Inc. (VER) – $8.65 billion market cap, 6.2% dividend yield.

National Retail Properties Inc. (NNN) – $6.75 billion market cap, 4.0% yield.

Vereit pays the highest yield…[but] when we consider price performance, we see that the big dividend isn’t helping:

The chart tells an entirely different story when it comes to safety of principal and price appreciation. We like dividends – but we also want to make sure our capital is secure.

Here’s where VEREIT fails: