Best Stock to Buy Right Now: Realty Income vs. NNN REIT

Investors looking for dividends might want to consider real estate investment trusts (REITs). That's because a REIT's tax structure requires it to pay out at least 90% of its taxable income as dividends.

REITs tend to specialize in owning different types of properties, leasing the properties out, and collecting rent. One of the popular property types is retail, but it can cause REITs headaches in tough economic times if not properly managed. For instance, many REITs struggled during the early days of the COVID-19 pandemic. For retail, the struggle was out of concern that e-commerce would cause physical stores to struggle. They also took a hit in 2022 and 2023 as interest rates rose to combat inflation. Higher interest rates mean it costs more for REITs to buy properties to rent out.

Many REITs managed to navigate those lean years and have fully recovered. For the first nine months of 2025, REITs specializing in retail properties returned 6.9% on average, according to the National Association of Real Estate Investment Trusts (Nareit).

Realty Income (NYSE: O) and NNN REIT (NYSE: NNN) are two REIT leaders, and both own thousands of retail properties. Each has great qualities and issues they are managing. If you had to choose one to invest in, which one offers the better long-term investment opportunity?

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The case for Realty Income

Realty Income owns 15,540-plus properties, receiving roughly 80% of its annual rent from retail properties. Grocery stores represent nearly 11% of its portfolio, and convenience stores another 10%. It also has exposure to many other kinds of retailers, such as home improvement and dollar stores. Roughly 15% of its rent comes from industrial properties, with the remaining derived from gaming and other properties.

Its biggest tenants include Dollar Genera , Walgreens, Home Depot, and Walmart. While renting to retailers can prove perilous, Realty Income had a 98.7% occupancy rate. And it renewed leases at a 3.5% higher rental rate. Realty Income's adjusted funds from operations (AFFO) increased 2.9% year over year to $1.09 per diluted share. AFFO is a key metric for REITs since it measures cash available for distribution.

The board of directors has increased dividends quarterly for over three decades (it IPO'd in 1994). Paid out monthly, the dividend is typically raised several times a year. Most recently, Realty Income hiked the monthly per-share payout in October from $0.269 to $0.2695. The company projects this year's AFFO per share will come in at $4.25 to $4.27, which will easily cover the annualized $3.23 in per-share dividends. Realty Income's stock has a dividend yield of 5.7%.

If there was any drawback to this company from an investor's standpoint, it could be argued that Realty Income's huge size makes it harder for it to buy properties that will register as strong growth. It would take a sizeable property investment to generate strong growth when you already own 15,000-plus. Investors might just have to be satisfied with slow, steady growth.

NNN REIT

NNN REIT leases its nearly 3,700 properties to retailers across industries. These include convenience stores, automotive services, restaurants, and family entertainment center properties, among other types of retailers.

NNN REIT appears to have done a good job managing tenants, with an occupancy rate that remained high. In the third quarter, it had a rate of 97.5%. Looking at its results, the company's quarterly AFFO per share rose from $0.84 to $0.86.

NNN REIT also has an impressive dividend history. It ran its streak to 36 years with an increase after hiking its August payment by 3.4% to $0.60 a share. With management projecting AFFO to come in at $3.41 to $3.45 a share, NNN REIT should have plenty of coverage to pay the higher rate. The dividend yields 5.9%.

NNN does benefit from its relatively smaller size to Realty Income. Investments it makes in new property can still significantly move the growth needle at this point in its development.

Making the choice

It's a difficult investment choice. Both continue to have success in a challenging retail environment because they invest in properties for businesses that are relatively immune to normal economic volatility. They have also built impressive dividend histories, with each raising payouts annually for more than three straight decades. And they have similar dividend yields.

It comes down to whether you prefer Realty Income as the larger, more established REIT or NNN REIT's smaller, more narrowly focused U.S. retail properties. Personally, I'd choose NNN REIT given it may have greater growth prospects, albeit with less diversification.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot, Realty Income, and Walmart. The Motley Fool has a disclosure policy.