Realty Income (O 0.80%) and NNN REIT (NNN 0.05%) stand out as elite dividend stocks in the real estate investment trust (REIT) sector. Both have consistently increased their dividends for over 30 years and currently offer attractive dividend yields of around 5.5%, significantly higher than the S&P 500’s (^GSPC 0.24%) yield of 1.2%. Given their similarities as retail-focused REITs with net lease models, investors often consider choosing between them for their portfolio. This article provides a detailed comparison to determine which of these compelling NYSE listed dividend stocks, particularly NNN REIT (NYSE: NNN), presents a better investment opportunity today.
Portfolio Diversification: NNN REIT vs. Realty Income
Both NNN REIT and Realty Income operate with similar business models, specializing in freestanding properties leased under long-term net leases. This net lease structure ensures stable cash flow as tenants are responsible for property operating costs, including maintenance, taxes, and insurance. This model provides consistent, growing income for both REITs as lease rates increase over time.
NNN REIT’s portfolio comprises approximately 3,550 properties valued at $12.9 billion, spread across 49 U.S. states. They lease to over 375 tenants across 37 retail-related lines of trade, with an average lease term of 10 years. NNN REIT’s primary tenant categories include:
- Automotive service (16.8% of annual base rent)
- Convenience stores (15.9%)
- Restaurants (8.4% limited service and 8.3% full service)
Alt: NNN REIT portfolio diversification showcasing top tenant industries including automotive service, convenience stores, and restaurants.
NNN REIT strategically focuses on partnering with expanding retailers needing capital for growth, often those with limited access to traditional credit. A significant portion of their tenants (85%) are not investment-grade rated. Their top tenants include well-known brands like 7-Eleven (4.6%), Mister Car Wash (4.1%), and Dave & Buster’s (3.9%).
In contrast, Realty Income boasts a significantly larger and more diversified portfolio. Ranking as the seventh-largest global REIT, Realty Income holds $58 billion in real estate assets across eight countries, encompassing over 15,450 properties leased to more than 1,550 clients in 90 different industries.
While Realty Income maintains a strong retail presence (79.4% of annual base rent), they also have diversified into industrial real estate (14.6%), gaming (3.2%), data centers (2.8%), and other property types. Realty Income targets leading global companies as tenants, with a focus on creditworthiness; 32% of their rent comes from investment-grade tenants. Their top industry tenants include grocery stores (10.4%), convenience stores (9.4%), and dollar stores (6.5%), with notable tenants like FedEx, Walmart, and Home Depot in their top 20.
Alt: Realty Income’s expansive and diversified real estate portfolio, highlighting its global reach and investments in retail, industrial, and data center properties.
In summary, NNN REIT concentrates on the U.S. retail sector, supporting growing businesses, while Realty Income pursues a broader diversification strategy, partnering with larger, often investment-grade rated corporations across various sectors and geographies.
Financial Stability and Growth: Comparing NNN and O REITs
When evaluating dividend stocks like NYSE: NNN and Realty Income, financial health and growth prospects are crucial. Let’s compare key financial metrics of these two REITs:
| Monthly Dividend Stock | Dividend Yield | Dividend Payout Ratio | Leverage Ratio | 2024 AFFO Growth Rate (Midpoint) | Price-to-AFFO |
|---|---|---|---|---|---|
| NNN REIT | 5.4% | 69% | 5.2x | 2.1% | 12.8x |
| Realty Income | 5.6% | 75.1% | 5.4x | 4.8% | 13.5x |
Data source: Realty Income and NNN REIT.
This comparison reveals that NNN REIT and Realty Income are financially sound. NNN REIT exhibits a slightly lower dividend payout ratio and leverage ratio. NNN REIT holds a solid investment-grade credit rating (BBB+/Baa1) and a well-structured debt maturity profile, with a long weighted average debt maturity of 12.3 years, among the longest in the REIT sector.
Realty Income’s financial strength is equally robust, if not stronger. It is one of the few REITs in the S&P 500 with credit ratings of A3/A- or better, signifying exceptional financial stability.
A key differentiator is growth rate. Realty Income anticipates an adjusted funds from operations (AFFO) growth of nearly 5% for the current year, more than double NNN REIT’s projected 2.1% growth. This higher growth rate aligns with Realty Income’s historical performance and future expectations, driven by its greater diversification, scale, and access to broader expansion opportunities.
NNN REIT vs. Realty Income: Investment Recommendation
Both Realty Income and NNN REIT are exceptional dividend REITs, each with a proven track record of over 30 years of consecutive dividend increases and backed by strong financial foundations.
However, notable distinctions exist. Realty Income’s more diversified portfolio, coupled with its larger scale and stronger balance sheet, positions it for faster growth compared to NNN REIT. For investors seeking a leading dividend stock with greater growth potential, Realty Income holds a slight advantage over NNN REIT. While both are attractive dividend investments, Realty Income emerges as the marginally better choice when comparing NYSE NNN REIT to Realty Income in the current market.
