Buy These 3 High-Yield Dividend Stocks Today and Sleep Soundly for a Decade

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If you’re looking for high-yield dividend stocks, one of the best places to start your search is in the real estate investment trust (REIT) sector. This corporate structure is specifically designed to pass income on to shareholders via large dividend payments.

But not all REITs are the same. Net lease REITs like Realty Income (NYSE: O), W.P. Carey (NYSE: WPC), and NNN REIT (NYSE: NNN) are some of the safest income choices around. Here’s why this trio could help you sleep soundly for a decade, or more, while you collect big dividend checks.

If you owned a rental property, you would collect the rent, but you’d be responsible for the maintenance of the property and the taxes, among other things. That’s pretty normal, but net lease REITs have leases that require their tenants to pay for most property-level operating costs. That may sound odd and perhaps even undesirable for the tenant, but it’s actually a win/win for both the landlord and the lessee.

Image source: Getty Images.

Net lease transactions are often capital-raising events, where a company sells a property it owns and uses in what is called a sale/leaseback transaction. The key is that the property, be it a retail location, a factory, or a warehouse, is a vital asset to the company’s business. It wants to make sure that the property is maintained to high standards. So keeping that responsibility is a good thing, even if it means paying all the property-level costs.

But, remember, the seller also gets to generate cash from the sale, which can be put toward growth initiatives or strengthening the balance sheet. So a net lease allows it to effectively retain control of the asset even while it raises the money it needs.

On the other side of the transaction, net lease REITs like Realty Income, W.P. Carey, and NNN REIT get a new property, which increases cash flows. They also get a tenant that, presumably, is strengthening its business. So that’s a win for the buyer, too. The only problem is that net lease assets are usually single-tenant properties, so each individual property is high-risk.

However, if you own enough properties, the risk is fairly low thanks to the benefits of diversification. Realty Income, W.P. Carey, and NNN REIT are three of the largest net lease REITs around, so their individual property risk is very low.

Realty Income is the largest of this trio, and the largest in the net lease industry, with a market cap of $55 billion. The dividend yield is an attractive 5% or so. (For reference, the average REIT is yielding around 3.7%) Realty Income has increased its monthly dividend every year for 29 years. Being so large tends to give the REIT advantaged access to capital markets, which means it can compete aggressively for properties and still turn a profit.

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