Big attraction for investors Analy Capital (NLY 0.41%) The dividend yield is a huge 13.2%. That's an impressive number, but the underlying dividend has been cut multiple times over the past decade. If you buy Annaly thinking you can live on that income, you may end up suffering a “pay cut” if history is any guide. It is better to choose a lower yield from a more reliable real estate investment trust (REIT). federal real estate (F.R.T. 0.90%), Universal Health Realty Trust (UHT 1.03%)or NNN REIT (NNN 0.58%). Let's take a quick look at each here.
1. Federal Realty is the king of the REIT sector
Annaly stands out for its high yield, while Federal Realty stands out for its impressive dividend streak. The company is the Dividend King with more than 50 years worth of annual dividend increases, making it the longest streak of dividend increases in the REIT sector. However, Federal Realty is unique in other ways as well. It's not uncommon to focus on strip malls and mixed-use projects, but it owns only about 100 properties. Most of its closest peers own much more than that (many own multiples of that figure). Federal Realty fundamentally focuses on quality over quantity.
This is no small problem, given that Federal Realty operates in more densely populated areas than its peers, and those areas often have affluent residents. Additionally, because of their small portfolios, his retail-focused REITs tend to pay special attention to redeveloping their properties, ensuring they remain top-ranked among competing options. After all, Federal Realty properties are the type retailers want to be in, and consumers want to shop there, too. The only problem is that stocks are usually given a premium valuation. Still, its current dividend yield of 4.2% is close to levels seen during the coronavirus pandemic and the Great Recession. It may be worth a look for investors who value stability of dividends.
2. Universal Health Realty is a high-yield snail.
Universal Health Realty is exactly what its name suggests: it owns healthcare assets. The portfolio is quite small, with only about 75 properties.Managed externally universal health services (UHS 0.13%), is also one of the largest tenants. Although this relationship raises some potential issues regarding corporate governance and trust, it is offset by the REIT's 38 consecutive years of annual dividend increases.
The big attraction here is the yield, which is around 6.8%. The problem is, we don't expect the dividend to grow very much, given that it's only grown at an average annual rate of 1.4% over the past 10 years. But if you value current earnings over dividend growth, that may be just fine, especially considering the yield is currently near a 10-year high.
3. NNN builds relationships
The last one is NNN REIT, formerly known as National Retail Properties. This REIT operates single-tenant retail properties and uses a net lease approach. Net leases require tenants to pay most of the property-level costs, which helps reduce REIT expenses and risks associated with things like inflation. A single property with just one tenant is risky, and when spread across a large portfolio, the net lease model is much less risky. NNN REIT has approximately 3,500 locations, making it one of the largest REITs in its sector.
The current dividend yield is 5.1%, which is near the high end of the dividend yield over the past 10 years. We have continued to increase our dividend every year for 34 years. But what really sets NNN REIT apart is its dedication to building strong relationships with its tenants. As such, around 70% of his acquisitions are relationship-based, meaning his REIT is growing in a symbiotic relationship with its tenants, clearly benefiting dividend-loving investors.
Looking beyond yields
Dividend investors tend to get caught up in dividend yield figures. However, there are many other factors to consider. For example, Annaly's high yield should be explained by the fact that the company is a serial dividend cutter. This is why most investors are better off focusing on stocks with dividend growth streaks like Federal Realty, Universal Health Realty Trust, and NNN REIT.
