3 Super-Reliable Real Estate Stocks to Buy and Hold for Passive Income

Key Points

• Realty Income has raised its dividend for 112 quarters in a row.

• Mid-America Apartment Communities has increased its dividend for 15 straight years.

• NNN REIT has the third-longest dividend growth streak in the REIT sector.

• 10 stocks we like better than Realty Income ›

Investing in real estate can be a reliable way to collect passive income. There are numerous opportunities for generating passive income from real estate, including purchasing a rental property or investing in a real estate investment trust (REIT).

Several top REITs have been super-reliable passive income investments over the years. Realty Income (NYSE: O), Mid-America Apartment Communities (NYSE: MAA), and NNN REIT (NYSE: NNN) stand out in the sector for their bankable dividends. Here's why they're great REITs to buy and hold for reliable income.

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The model of consistency

Realty Income has been one of the most reliable dividend stocks in the REIT sector. The landlord has paid 663 consecutive monthly dividends throughout its history. It has raised its dividend payment 132 times since its public market listing in 1994, including for 112 consecutive quarters. That encompasses more than three decades of annual dividend increases. Realty Income's payout, which currently yields 5.4%, has grown at a compound annual rate of 4.2% during that period.

The REIT is in an excellent position to continue paying a reliable and steadily rising dividend. It invests in a diversified portfolio of commercial real estate (retail, industrial, gaming, and other properties) secured by long-term triple net (NNN) leases. Those leases require tenants to cover all property operating costs, including routine maintenance, real estate taxes, and building insurance.

As a result, Realty Income generates very stable rental income, 75% of which it pays out in dividends. This enables it to retain a significant amount of cash to invest in additional income-generating properties.

Realty Income also has one of the strongest balance sheets in the REIT sector. That gives it additional financial capacity to invest in new properties. It currently expects to spend $5 billion on new properties this year. That's a small fraction of the $14 trillion opportunity it sees to invest in NNN real estate across the U.S. and Europe.

Decades of dividend durability and growth

Mid-America Apartment Communities has been a very reliable dividend stock over the decades. The residential REIT has never suspended or reduced its dividend in its more than 30 years as a public company. While the landlord hasn't increased its payout every year, it has raised it in each of the past 15 years. Mid-America's dividend, which currently yields 4.3%, has grown at a 7% compound annual rate over the past decade, significantly exceeding the sector average.

The apartment landlord is in a great position to continue paying a stable and growing dividend. It owns one of the country's largest apartment portfolios, with properties primarily in the Sun Belt region. As a result, it's benefiting from the above-average population and jobs growth, which is driving strong demand for rental housing. That should keep occupancy levels high while steadily driving up rental rates.

Mid-America is also capitalizing on the strong housing demand by building additional apartment communities. The company is currently investing $942.5 million across eight development projects, which it expects to complete by 2028. Meanwhile, it has the land to support several more new developments, with plans to approve three to four projects this year.

Mid-America also has one of the strongest balance sheets in the REIT sector, giving it the flexibility to fund development projects and acquire new apartment communities. The combination of rising rental income and portfolio growth should enable Mid-America to continue increasing its dividend.

A long history of dividend growth

NNN REIT reached a key dividend milestone last year, hitting its 35th straight year of dividend increases. Only two other REITs and fewer than 80 publicly traded companies have achieved that feat. NNN REIT has since extended its dividend growth streak to 36 years in a row.

The company has a very straightforward investment strategy. It invests in single-tenant retail properties, such as automotive service centers, convenience stores, and restaurants secured by long-term, NNN leases. Those leases provide it with very stable and predictable cash flow.

NNN REIT pays out a conservative percentage of its cash flow in dividends, enabling it to retain cash to invest in additional income-generating retail properties. It typically forms relationships with growing retailers. It will buy properties in sale-leaseback transactions, providing its clients with the capital to continue expanding, which often yields future acquisition opportunities. This strategy should enable NNN REIT to continue growing its portfolio and 5.7%-yielding dividend.

Really reliable REITs

Realty Income, Mid-America Apartment Communities, and NNN REIT have been some of the most reliable dividend stocks in the sector. They've delivered more than three decades of dividend stability and growth. All three should continue to be reliable income producers in the years ahead, making them great REITs to buy and hold for passive income.

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Matt DiLallo has positions in Mid-America Apartment Communities and Realty Income. The Motley Fool has positions in and recommends Mid-America Apartment Communities and Realty Income. The Motley Fool has a disclosure policy.