If you're a dividend investor, there are several things you should be looking for in addition to a high dividend yield. Just to name a few, great dividend stocks have these characteristics:

  • Safety -- the risk that the dividend will be cut or eliminated is small.
  • Dividend growth -- does the dividend have a history of growing over time?
  • Growing business -- does the business itself have potential to grow?

One area of the market where you can find great dividend stocks is the equity REIT sector. Not only do solid REITs generate income streams that naturally grow over time with inflation, but as property values rise, these stocks can also generate some serious growth. Here are two of my favorites that you can buy and hold for decades to come.

NNN Total Return Price Chart

The right kind of retail
Investing in retail properties may seem too risky. After all, there have been several high-profile retail bankruptcies in recent years, and many other retailers are struggling to survive. In fact, many buildings that housed now-defunct retailers such as Blockbuster Video are still sitting vacant. So why would anyone want to own retail buildings?

In short, there is a right and wrong kind of retail to invest in. The right kind is what makes up National Retail Properties' (NYSE:NNN) portfolio and consists of businesses with little online competition, so people have to physically go to them. This list includes:

  • Businesses that sell non-discretionary goods: Examples include convenience stores, which make up 16.8% of the company's properties, as well as grocery, home improvement, and drug stores.
  • Businesses that provide a service: Restaurants are a good example, making up 18.2% of National Retail's properties. The company also owns a significant amount of family entertainment centers, theaters, automotive service businesses, and travel plazas.
  • Businesses that sell heavily discounted items: Wholesale clubs are included in this category and have little threat from online competitors.

Further adding to the stability is National Retail's long-term net lease structure. Tenants sign leases for 15 to 20 years at a time, generally with annual rent increases built in. The "net" leases require tenants to pay variable costs, such as property taxes, insurance, and maintenance, creating little uncertainty in the company's income stream.

The proof is in the performance. National Retail's occupancy hasn't fallen below 96.4% in the past 12 years, and the company has increased its dividend for 26 consecutive years. With a 4.1% dividend yield, and an average annual total return of 14.9% over the past 25 years, National Retail is a clear long-term winner.

A different kind of tech stock
It seems as if Americans are constantly taking more pictures and videos and uploading them all over the Internet. And that companies are increasingly moving their services online. So it's no wonder that tech companies have an exponentially growing need for data storage.

Digital Realty Trust (NYSE:DLR) owns and operates data center properties, the space in which is leased out to such tenants as Facebook, IBM, AT&T, and LinkedIn. The need for this type of property should grow rapidly in the coming years. According to Cisco Systems, global IP traffic is expected to grow at a 23% annual rate through 2019, and GE Capital projects that the average person will possess about seven connected devices in 2020, up from just two a decade earlier.

In addition to the rapid growth potential, the data storage real estate business has some attractive qualities. For example, data centers retain their tenants at an 84% rate, as compared with a 55% average for all types of real estate. And Digital Realty doesn't need full occupancy to make money. In fact, the company can produce a 4% return on invested capital with just 50% occupancy and can break even at just 30%. Currently, the company's properties are 93% occupied, so there's a pretty big cushion there.

Over the past decade, Digital Realty has produced a remarkable 18.7% average annual total return for its investors over the past decade, as the data storage market has taken off. And the dividend (currently 4.4%) has grown at an average rate of 14% per year over that time period.

Source: Digital Realty.

Just a starting point
This is by no means an exhaustive list, and in fact there are dozens of other great REITs you can invest in for the same reasons. By applying the principles I've discussed with each of these three REITs, you can find your own diverse assortment of REITs than can produce excellent income and market-beating performance in your portfolio for decades to come.