NNN REIT: A Safe and Reliable Dividend Stock with a History of Growth

NNN REIT, Inc. (NYSE:NNN) is a safe dividend stock to buy due to its long-term net leases, high-quality retail properties, and 36 consecutive years of dividend increases. The company's low payout ratio and conservative balance sheet provide financial flexibility to continue acquiring income-generating assets, supporting its 5.64% dividend yield as of July 27.

NNN REIT, Inc. (NYSE:NNN) has consistently demonstrated its appeal as a safe dividend stock due to its robust portfolio of long-term net leases, high-quality retail properties, and a history of 36 consecutive years of dividend increases. The company's financial stability and conservative balance sheet position it well to continue acquiring income-generating assets, supporting its 5.64% dividend yield as of July 27.

Fundamentals and Performance

NNN REIT focuses on single-tenant properties, primarily leased to retail businesses under long-term, net leases. This structure provides a predictable cash flow and higher operating margins, as tenants are responsible for property maintenance, insurance, and taxes. The company's tenant industries, such as automotive service, convenience stores, restaurants, and RV dealers, are generally resilient to economic downturns and e-commerce trends.

Dividend Yield and Payout Ratio

NNN REIT's dividend yield stands at 5.64% as of July 27, making it an attractive option for income-focused investors. The company's payout ratio of 69% indicates a well-covered dividend, allowing for financial flexibility and self-funding of growth without excessive reliance on public markets.

Balance Sheet and Financial Flexibility

NNN REIT maintains a strong balance sheet with BBB+/Baa1 credit ratings from S&P and Moody's. The company has a long weighted average debt term of 11.6 years and a net debt-to-EBITDA ratio of 5.5x, which is below the generally considered safe level for REITs. The debt maturities are well-laddered, spreading out interest rate risk over time. Additionally, 100% of NNN's assets are unencumbered, ensuring no secured debt.

Acquisition Strategy and Growth

The company's acquisition strategy is focused on sale leaseback transactions, leveraging existing tenant relationships to drive consistent repeat business. This approach has enabled NNN REIT to complete 40% of its full-year acquisition target as of the end of Q1 2025. The company aims to spend between $500 million to $600 million on acquisitions in 2025, driven by attractive cap rates and the need to maintain a high occupancy rate.

Risks and Outlook

While NNN REIT has a strong track record, it is not without risks. Potential new tenant bankruptcies, such as At Home, a home décor retailer, could impact short-term performance. However, the company's diversified tenant base and long-term lease structure should mitigate these risks.

Conclusion

NNN REIT, Inc. is a safe dividend stock with a strong foundation of long-term net leases, high-quality retail properties, and a history of consistent dividend increases. Its conservative balance sheet and financial flexibility position it well to continue acquiring income-generating assets and supporting its attractive dividend yield. While risks exist, NNN REIT's resilient tenant base and efficient cost structure provide downside protection during economic downturns.

References:
[1] https://finance.yahoo.com/news/much-earn-100-month-nnn-120016482.html
[2] https://seekingalpha.com/article/4805010-nnn-reit-buying-this-bargain-for-recurring-income