National Retail Properties (NNN 1.37%) offers investors a generous 5% dividend yield, more than double what you'd get from an S&P 500 index fund. And the net lease real estate investment trust's (REIT's) dividend has grown steadily over the years, as well. These are admirable qualities in a dividend stock and are not easily maintained over several years, especially when the economy starts to head south.

Here are five reasons why you don't need to worry about National Retail Properties' dividend stalling out, despite fears of a recession.

1. National Retail Properties operated a simple business model

National Retail Properties is what's known as a net lease REIT, which means that its tenants are responsible for most of the operating costs of the assets they occupy. Further, the REIT is laser-focused on domestic single-tenant retail properties. These tend to be easy to release or sell should something go wrong.

Adding new assets, meanwhile, isn't terribly hard to do, either. Although any individual property poses a material risk, across a large portfolio (the REIT owns over 3,300 properties), the risk is fairly low. 

A hand planting money in the ground to show long term investing growth.

Image source: Getty Images.

Basically, National Retail Properties has a playbook that's been well tested over time. It isn't exciting, but for dividend investors looking for a consistent income stream, it's highly desirable. 

2. National Retail Properties is dedicated to dividend growth

The success of the company's simple, low-risk approach shows up in its dividends. The payment has been increased annually for 33 consecutive years. That would normally make it a Dividend Aristocrat, a highly elite group of companies that have proven their commitment to rewarding investors by raising their dividends annually for at least 25 straight years. But another qualification of a Dividend Aristocrat is being a member of the S&P 500, and National Retail Properties is not in that group of stocks.

What's notable here, however, is the difficult periods through which the dividend was increased over those three-plus decades. For example, in 2020, when non-essential businesses were shut down because of the coronavirus pandemic, National Retail Properties still increased its dividend. The same was true during the Great Recession, between 2007 and 2009, when there were legitimate concerns that the financial underpinnings of the global economy could come undone.

If the company managed to hike the dividend through these extremely difficult periods, there's no reason to doubt its commitment to keeping the dividend increases going in the future. 

3. National Retail Properties' leases have built-in price hikes

Another benefit of the net lease model is that long leases with regular contractual rent hikes are the norm. The average remaining lease term for the REIT is just over 10 years.

That should be long enough to bridge economic weak patches, like a recession. And as National Retail Properties highlights, there's a self-selection bias here since tenants are unlikely to sign a long-term lease for a questionable store location.

Meanwhile, at the end of the lease, companies usually prefer not to relocate, leading to renewal rates in the 80% to 90% space at very little extra cost, even though rents are often boosted to the current market rates. On top of that, leases generally include small but regular rent bumps (around 1.5% to 2% a year), which keeps rental income growing between renewals. Thus, National Retail Properties' model includes a growing income stream from which to pay larger dividends.

4. Growing from within

Another key factor here is that National Retail Properties sees itself as a partner to its tenants, not just a landlord. That means providing vital growth capital via sale/leaseback transactions, even though some of its tenants have below-investment-grade balance sheets.

This is no small issue, as 70% of its acquisition volume since 2007 came from existing relationships. Those deals generally were done with higher returns, as well, at least partly because the tenant knew it was working with a reliable financial partner.

This acquisition approach means that the REIT can usually grow its portfolio no matter what market conditions look like and at attractive rates of return. A growing portfolio means more cash available for dividend increases.

NNN Chart

NNN data by YCharts.

5. National Retail Properties has room to spare

Finally, in 2021, National Retail Properties' adjusted funds from operations' (FFO) payout ratio was approximately 70%. That would be high for an industrial company, but for a REIT, it's fairly conservative. And it means there's ample room to account for potential adversity and for further dividend increases.

A happy tortoise

National Retail Properties is never going to excite you with dividend growth. In fact, dividend growth has historically been in the low single-digit percentages. But when you add that up year after year for over three decades, the income story starts to get pretty interesting.

If you're looking for a consistently growing dividend, you'll want to take a look at National Retail Properties today. And you can do so with little fear that the REIT's impressive dividend streak is at a material risk of ending.