Investing in dividend stocks is a no-brainer strategy. Over the last 50 years, dividend stocks have outperformed nonpayers by more than two to one (9.2% annualized total return, compared to 4.3%, according to data from Ned Davis Research and Hartford Funds). The best returns have come from companies that routinely increase their dividends (10.2% average annual return).
Prologis(NYSE: PLD), Invitation Homes(NYSE: INVH), and NNN REIT(NYSE: NNN) are standout dividend growth stocks. That’s one of the many reasons they’re no-brainer buys for those with $2,000 to invest right now.
Image source: Getty Images.
Prologis is one of the world’s largest real estate investment trusts (REITs). It owns an irreplaceable portfolio of logistics properties around the world. Its properties are crucial to global trade, as $2.7 trillion of goods flow through its distribution centers each year, representing 2.8% of the world’s GDP.
Its strategically located properties are in high demand by retail, e-commerce, and logistics companies. That keeps occupancy high and drives steady rent growth. As a result, Prologis generates very stable and steadily rising rental income.
It uses a portion of that money to pay an attractive and growing dividend. The REIT’s payout currently yields 3.7%, more than double the S&P 500‘s (SNPINDEX: ^GSPC) level of 1.3%. Prologis has grown its dividend at a 13% compound annual rate over the last five years, which is much faster than the S&P 500 (5%) and other REITs (5%).
The company is in a strong position to continue increasing its payout. In addition to rent growth, Prologis has the financial strength to invest heavily in expanding its portfolio. It has a massive land position to support new warehouse developments. It also selectively builds data centers. In addition, the REIT makes accretive acquisitions as opportunities arise.
Invitation Homes is a REIT focused on owning and managing single-family rental homes. It owns or manages over 110,000 rental properties in 16 top housing markets, primarily in the fast-growing Sun Belt region. It focuses on markets benefiting from above-average job and population growth rates. Those factors drive demand for rental housing, keeping occupancy high and rental rates rising.
The landlord steadily expands its portfolio by acquiring new homes. It buys them from other investors, off the open market, through joint ventures, and directly from builders. It currently has over 1,800 homes under construction that it will acquire upon completion.
Invitation Homes’ rising rental income and steadily expanding portfolio provide it with growing cash flows to support its dividend, which currently yields 3.4%. The REIT has raised its payout every single year since it went public in 2017, including by 3.6% last year.
NNN REIT is a REIT focused on owning single-tenant retail properties secured by long-term, triple net (NNN) leases. NNN leases provide it with very stable cash flow because tenants cover all property operating costs, including routine maintenance, real estate taxes, and building insurance. The REIT uses most of its very stable cash flow to pay dividends. Its payout currently yields 5.5%.
The company has increased its dividend for 35 straight years. Only two other REITs and fewer than 80 publicly traded companies have reached that milestone.
Acquisitions are the main factor driving dividend growth. NNN REIT’s strategy is to partner with growing retailers needing capital to expand. It buys well-located properties from these retailers via sale-leaseback transactions. These sales provide them with the capital to open new locations, which will supply the REIT with future acquisition opportunities.
Steadily acquiring income-generating retail properties grows its cash flow, which allows it to keep increasing its dividend.
With dividend yields between 3.4% and 5.5%, this trio of dividend-paying REITs can turn $2,000 into as much as $110 of annual dividend income. They should continue growing their dividends in the future as they increase their cash flow through rent growth and portfolio expansion. That combination of income and growth should add up to an attractive total return over the long run, making them look like no-brainer buys right now.
Before you buy stock in Prologis, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Prologis wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,you’d have $653,702!* Or when Nvidiamade this list on April 15, 2005… if you invested $1,000 at the time of our recommendation,you’d have $870,207!*
Now, it’s worth notingStock Advisor’s total average return is988% — a market-crushing outperformance compared to172%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
Matt DiLallo has positions in Invitation Homes and Prologis. The Motley Fool has positions in and recommends Invitation Homes and Prologis. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.
