You work hard for your money. Because of that, your hard-earned money should work hard for you. One way to make money on your money is to invest it in stocks that pay a dividend, enabling you to earn some passive income from your investment.
Real estate investment trusts (REITs) are great for making passive income because they have to pay dividends to comply with IRS regulations. However, some REITs stand out for their ability to grow their dividend payment each year. Essex Property Trust (ESS +0.44%), National Retail Properties (NNN 0.62%), and W.P. Carey (WPC +0.41%) have all delivered dividend growth for more than two decades. Here's a closer look at these passive-income warriors.
NYSE: ESS
Key Data Points
An elite REIT
Essex Properties Trust is a residential REIT focused on owning apartment communities along the West Coast. The company has increased its dividend in each of the past 28 years, qualifying the S&P 500 member as a Dividend Aristocrat. Essex is one of only three REITs in that elite group. Essex also offers an attractive dividend yield of 3.3%, more than double the 1.6% yield of the S&P 500.
The company's focus on the West Coast has been one of the keys to its success. Essex has benefited from steady demand for apartments in major West Coast cities, where it's often cheaper to rent than buy a home. That's helped keep occupancy levels high, enabling the REIT to steadily raise rental rates. It has also allowed the REIT to expand its portfolio by developing new apartment communities.
Essex Properties should be able to continue providing its investors with a steadily growing passive income stream. Demand for apartments remains strong while building new apartment communities is challenging, keeping a lid on new supply. As a result, rents should continue rising. On top of that, Essex has a strong balance sheet, giving it the financial flexibility to continue expanding its apartment portfolio by making acquisitions and developing new communities.
NYSE: NNN
Key Data Points
Focused on retailers that need real estate
National Retail Properties is a retail REIT focused on owning freestanding properties triple net leased (NNN) to retailers needing physical space to drive sales. It concentrates on retailers not susceptible to the threat of e-commerce, like restaurants, convenience stores, automotive services, and equipment rental stores. This strategy has enabled the REIT to generate steady rental income, providing it with a solid foundation for its 4.8%-yielding dividend.
National Retail Properties stands out for its ability to consistently increase its dividend. The REIT notched its 32nd consecutive year of increasing its dividend in 2022. While that's long enough to be considered a Dividend Aristocrat, it doesn't make the list because it's not a member of the S&P 500.
The company should be able to continue growing its dividend in the future. The REIT has a conservative dividend payout ratio and balance sheet. That gives it the financial flexibility to buy more income-producing retail properties. It typically purchases properties from the operator in sale-leaseback transactions. That gives retailers the capital to continue expanding while providing National Retail Properties with more income-producing real estate.
NYSE: WPC
Key Data Points
A rock-solid REIT
W.P. Carey is a diversified REIT that owns operationally critical real estate NNN leased to single tenants. It holds industrial, warehouse, office, retail, self-storage, and other properties in the U.S. and Europe. That diversification has enabled W.P. Carey to collect steady rental income.
This stable rental income provides a solid foundation for W.P. Carey's dividend. The REIT has increased its payout every year since its initial public offering in 1998. Driving dividend growth has been steadily rising rental rates and its ability to expand its portfolio by acquiring income-producing real estate.
W.P. Carey should be able to continue growing its dividend. The REIT has a solid dividend payout ratio and balance sheet, giving it the financial flexibility to continue making deals. Add in the continued growth of rental rates on existing properties, and the REIT should have the rising cash flow needed to keep increasing its 4.9%-yielding payout.
Great REITs for making passive income
Essex Property, National Retail Properties, and W.P. Carey have delivered decades of steadily rising dividends. Given their solid financial profiles and durable portfolios, these REITs should continue to provide more passive income to their investors in the coming years. That makes them stand out as great stocks for those seeking passive income.
