Investing in dividend stocks is a great way to make some extra cash. The top ones pay a lucrative income stream that steadily rises, enabling you to turn idle cash into a growing stream of passive income.
Four Corners Property Trust (NYSE: FCPT), VICI Properties (NYSE: VICI), and NNN REIT (NYSE: NNN) are three great income options. These real estate investment trusts (REITs) currently have dividend yields of 5% or more, which is much higher than the average dividend stock (the S&P 500's dividend yield is less than 1.5%). Those higher-yielding payouts, which should continue to grow, can provide a nice boost to your passive income.
A delicious dividend
Four Corners Property Trust owns restaurants and other retail properties it net leases to tenants under long-term contracts (with a 7.3-year remaining term). That lease structure supplies it with very stable rental income because tenants cover all operating costs, including routine maintenance, real estate taxes, and building insurance. The REIT's steady cash flow supports its dividend, which currently yields around 5%.
The landlord currently owns about 1,200 properties leased to 163 brands. Darden Restaurants is its top tenant, with Olive Garden accounting for 34.4% of its rent, Longhorn Steakhouse at 9.7%, Cheddar's at 2%, and Bahama Breeze at 1.4%. Overall, about 75% of its rent comes from restaurants, while the remaining 25% comes from other retail properties, like auto service and medical retail.
The company routinely buys additional properties. It recently bought a Chuy's property from Darden for $2.9 million, an Outback Steakhouse for $1.6 million, and an auto service property for $5.3 million. These investments diversify and grow its portfolio, enabling Four Corners to increase its dividend. It raised its payout by 2.9% in November and has hiked its dividend by more than 45% since Darden spun it off in 2015.
A low-risk gamble on a steadily rising dividend
VICI Properties invests in experiential real estate, like casinos and entertainment complexes, secured by very long-term triple-net (NNN) leases (with a 41-year remaining term). Those leases supply it with stable, steadily rising cash flow to pay dividends. The REIT's payout currently yields 5.3%.
An increasing percentage of VICI Properties' net leases link rents to inflation (42% this year, rising to 90% by 2035). Because of that, its rental income should steadily increase. Meanwhile, the REIT routinely invests money in new experiential properties. It will buy casinos and other properties through sale-leaseback transactions with operating companies, invest additional capital in its existing properties in exchange for a rent increase, and fund experiential development projects.
Those growth drivers enable VICI Properties to increase its dividend. It has raised its payout every year since its formation (seven straight years), growing it at a 7% compound annual rate during that period.
An elite dividend stock
NNN REIT, as the name suggests, is a REIT focused on investing in NNN real estate. More specifically, it concentrates on investing in single-tenant retail properties, including convenience stores (17% of its rent), automotive service locations (16.9%), and restaurants (8.4% limited service and 7.8% full service), secured by long-term NNN leases (with a 10-year average remaining lease term). These properties provide it with very stable rental income to support its dividend, which yields 5.7%.
The landlord builds relationships with its tenants, which allows it to steadily acquire properties from them in sale-leaseback transactions. About 73% of its investment volume since 2007 has come through existing tenant relationships.
NNN REIT's conservative investment strategy has paid off for its shareholders over the years. It has increased its dividend for 35 straight years. That's the third-longest streak in the REIT sector and puts it in a group of fewer than 80 publicly traded companies that have grown their payouts for at least 35 consecutive years.
Excellent income producers
Four Corners Property Trust, VICI Properties, and NNN REIT focus on owning properties secured by long-term net leases that generate very stable rental income. This structure enables them to pay attractive dividends and invest in growing their portfolios, allowing them to steadily increase their dividends. With yields of 5% or more, these REITs can provide a nice boost to your passive income.
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Matt DiLallo has positions in Vici Properties. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.
