10. NNN REIT, Inc. (NYSE:NNN)
Dividend Yield as of September 24: 4.83%
NNN REIT, Inc. (NYSE:NNN) is a Florida-based real estate investment trust company that mainly invests in high-quality properties. The company’s net leases provide steady income for the landlord, as the tenant is responsible for all operating expenses, such as maintenance, insurance, and property taxes. It secures long-term lease agreements, typically lasting 10 to 20 years, with reliable national and regional retailers. Its portfolio is also well-diversified across different tenants and sectors.
In the second quarter of 2024, NNN REIT, Inc. (NYSE:NNN) reported revenue of $217 million, which showed a 7% growth from the same period last year. The revenue also beat analysts’ estimates by $2.6 million. The company’s balance sheet was also strong as it ended the quarter with $2.1 million available in cash and cash equivalents, up from $1.2 million six months ago.
The company’s strong business momentum was also highlighted by Artisan Partners in its Q4 2023 investor letter. Here is what the firm has to say about NNN:
“In the first few days of October, we made our sole new purchase of the quarter: NNN REIT, Inc. (NYSE:NNN). NNN is a real estate investment trust (REIT) that executes triple net leases—a type of lease in which the tenant pays, in addition to rent and utilities, three other property expenses: insurance, maintenance and taxes. Typical advantages of triple net lease REITs versus other REITs involve lower leverage, lower capital intensity and a more stable rent roll that contribute to the ability to smartly fund growth. NNN focuses on free-standing single-tenant buildings whose tenants are in service retail industries (e.g., convenience stores, restaurants, gyms and car washes). Overall, NNN has been in the triple net business for 40+ years, has a seasoned and conservative management team and has operated successfully in and out of cycles. NNN’s approach is one of focus, discipline and creating economic value per share, which are traits often lacking in the real estate industry. As evidence, during a period of low cap rates and cheap leverage, NNN didn’t aggressively pursue acquisitions to improve short-term earnings but instead extended the duration of its borrowings to lock in low financing costs. NNN has an average duration on its debt of 12 years, which is more than double the peer average. Importantly, this provides NNN balance sheet protection in a rising rate environment, allowing the company to go on the offensive while other industry participants pull back due to soaring borrowing costs. At our time of purchase, the market’s desire to exit businesses with interest rate risk wasn’t differentiating between individual REITs and how they would perform in a higher for longer interest rate environment. In the case of NNN, our purchase was well timed as the stock rose 25% in Q4 as inflation data indicated we are probably past the peak of a rate tightening cycle.”
NNN REIT, Inc. (NYSE:NNN) also maintains a strong dividend history, which makes it one of the best stocks on our dividend champions list. In July, the company raised its common stock dividend by almost 3% to $0.58 per share, while maintaining a low dividend payout ratio. This marks the 35th consecutive year of annual dividend increases, a milestone achieved by only two other publicly traded REITs. The stock has a dividend yield of 4.83%, as of September 24.
At the end of June 2024, 16 hedge funds in Insider Monkey’s database owned stakes in NNN REIT, Inc. (NYSE:NNN), compared with 17 in the previous quarter. These stakes have a total value of $195 million.
