This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Two Triple Net REITs That Score From Half Court

NEW YORK ( TheStreet) -- As I have often explained, triple net REITs are great dividend stocks since they own and invest in free-standing properties with long-term contractual leases.

For the average investor, it's easy to get close to the value creation of a triple net REIT since all of us have visited a Walgreen (WAG) or shopped at a nearby Wal-Mart (WMT) store. Other properties owned by triple net REITs and leased to corporate users include FedEx (FDX), Dollar General (DG) and literally thousands of other corporate brands across the nation.

In fact, Walgreen recently completed the sale of six office buildings in its Deerfield headquarters to Realty Income (O) as part of an effort to monetize the drug store chain's balance sheet comprising of 574,605 square feet on 38 acres (according to the Los Angeles Times). Although the sales price is not confirmed, industry sources indicate the property would trade for around $85 million or higher.

Owning investment grade triple net real estate is comparable to investing in a bond; however, there are notable differences since real estate is a tangible asset that does appreciate and bondholders are creditors and they have no ownership in the companies. Notably, bond investors enjoy the interest income as well as the return of principle. Conversely, REIT investors like dividends and having an equity stake.

Triple net REITs offer a hybrid of sorts. Due to lower bond yields, many investors have substituted REITs for bonds to replace interest income with dividend income. It's important to recognize the difference between being a creditor (a bond holder) and an owner (a REIT owner), especially when dividends are cut or eliminated.

Two Net Lease REITs That Shoot More Than Layups

The landscape of triple net REITs is getting much larger as many companies look for ways to monetize the premium pricing in REIT-dom. Of course, driving the demand for income seems to be the biggest attraction as REITs pay no corporate taxes and instead are forced to pay out at least 90% of taxable income in the form of dividends.

Since triple net REITs lease buildings to corporations on a net-net-net basis (meaning the tenant pays for taxes, insurance and maintenance costs), the income stream is less volatile and the costs to operate (i.e. G&A costs) are minimal. That translates into higher and more predictable dividends. According to Nareit, the triple net REITs pay out some of the highest dividends in the equity REIT sector -- around 4.66% for triple net REITs compared to 3.68% for the entire equity sector.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
COLE $0.00 0.00%
GPT $28.55 0.07%
AAPL $123.25 -0.80%
FB $83.30 0.35%
GOOG $548.34 -1.23%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs