When it comes to net lease real estate investment trusts (REITs), few can match National Retail Properties' (NYSE:NNN) more-than-three-decade streak of annual dividend increases. But it only owns retail properties, and during the depths of the COVID-19 economic shutdown, that led to nearly 50% of its rent roll not paying.

National Retail Properties will likely be fine. However, investors who want this type of business in their portfolios -- but who are worried about that number -- might want to look instead at some of its more diversified peers like STORE Capital (NYSE:STOR), VEREIT (NYSE:VER), and W.P. Carey (NYSE:WPC).   

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A bit more spread out

STORE Capital is a relatively young REIT, with a focus on single-tenant properties. The net lease model means tenants are largely responsible for their properties' operating costs. The company also takes a hands-on approach when it comes to originating its own contracts. This gives it greater insight into the finances of its lessees and allows it to control the lease terms. Both are benefits for the REIT.

However, the more salient factor here is that STORE has followed a policy of diversification. Service-based businesses make up around 65% of its rent roll, traditional retail 18%, and manufacturing 17%. During the most widespread period of COVID-19 shutdowns, its rent collection rate was around 70%. It is now back up to around 90%. And, despite the rough patch, STORE increased its dividend by a token penny a share in September. Basically, it was a show of strength. Given its dividend, which yields about 5.6% at recent prices, and its now-proven track record through a period of adversity, investors looking for a more diversified REIT should take a look.  

A dividend cutter with a complex history

VEREIT might be a tougher sell for some investors because it cut its dividend as the pandemic started to spread. However, there's a much longer story here. VEREIT was created through a rapid series of acquisitions that ended in 2014 when the company revealed an accounting scandal. The top managers were shown the door, the dividend was suspended, and a new team was brought in to run things. Led by industry veteran Glenn Rufrano, the new leadership quickly set out a list of priorities that included mending the balance sheet, rightsizing the portfolio, reinstating the dividend, and dealing with the legal aftermath of the accounting issues.

At the end of 2019, the company finally put to rest the final item on the list, the legal issues -- just in time for COVID-19 to disrupt its business. However, even during its worst month of 2020, the REIT still collected roughly 80% of the rent it was due. That number is up to 95% at this point.   

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One of the key factors here, too, is diversification. The portfolio is spread between retail (45% of rents), restaurant (21%), office (18%), and industrial (17%) assets. That's even more diversification than STORE offers.

But what about the dividend cut? While that's clearly not a positive move for shareholders, Rufrano made it clear the decision was made because of the macro environment, not because of anything trouble at VEREIT specifically. It also happens to set the REIT up for a shift back toward growth, as it will help reduce its cost of capital. This is a bit of a turnaround play, but with a payout that yields 4.9% at recent prices and a clean slate, this net lease REIT would be well worth considering.  

A REIT in a league of its own

Last up is W.P. Carey, one of the most diversified net lease REITs you can buy. To put some numbers on that, its portfolio is divided among industrial (24% of rents), office (23%) warehouse (22%), retail (17%), self storage (5%), and other (the rest). As if that weren't enough, it generates roughly 37% of its rents from outside of the United States. Diversification is just as good for your portfolio as it is for W.P. Carey's -- its rental collections never dropped below 96% this year, and has even increased its dividend by a token amount each quarter.   

Like STORE, W.P. Carey tends to create its own leases. It also has a long history of being opportunistic with its investments. It's been acquiring assets, taking advantage of these difficult times to build its portfolio. And it's worth noting that the REIT has a 23-year streak of annual dividend increases under its belt backing up its 6.8% yield. 

Broaden your scope

National Retail Properties has a long history of success. However, its total focus on retail is something that investors should think about carefully before they open a position. The pandemic has made it abundantly clear why a lack of diversification is a risk. If you'd like to spread your REIT sector bets out a bit more, you'd do well to consider STORE, VEREIT, and W.P. Carey.