Dividend stocks can be no-brainer investments. Over the last 50 years, the average dividend stock in the S&P 500 has outperformed non-dividend payers by more than 2 to 1, with the best performance coming from dividend growers. Dividend growth stocks have delivered a 10.2% average annual return, compared to 4.3% for non-payers, according to data from Ned Davis Research and Hartford Funds.
The return of dividend growth stocks has really added up over the years. For example, a $100 investment in the average dividend growth stock 50 years ago would have grown into over $14,100 (assuming dividend reinvestment). That compares to only around $850 for the average dividend non-payer.
Sun Communities (NYSE: SUI), Invitation Homes(NYSE: INVH), and NNN REIT(NYSE: NNN) have great track records of increasing their dividends. That makes them no-brainer dividend stocks to buy right now for those with a little bit of cash to spare.
Surprisingly resilient properties
Sun Communities is a real estate investment trust (REIT) with a niche focus. It owns manufactured home communities, RV resorts, marinas, and U.K. holiday parks.
These properties have delivered strong performance over the years. The REIT has recorded more than 20 straight years of positive net operating income (NOI) growth. Its NOI has grown faster than the REIT sector average (5.2% compound annual rate since 2000, compared to 3.2% for the industry).
That steady growth has helped support a rising dividend. While Sun Communities hasn't increased its payment every year, it has grown its dividend for eight straight years (and by nearly 45% over the last decade). It currently offers a 3% dividend yield at its recent share price of around $125.
Sun Communities is in a solid position to continue increasing its dividend. The REIT expects to continue raising rents across its properties, especially since moving a manufactured home out of a community is very costly.
The company is also steadily converting transient RV sites to seasonal rentals and expanding its communities. It also has a strong balance sheet, giving it the financial flexibility to acquire additional properties as they become available.
Cashing in on the affordability crisis
Invitation Homes is a REIT focused on single-family rental properties. It owns or manages over 110,000 homes across 16 major U.S. markets. The company focuses on major metro areas benefiting from above-average population and job growth.
The REIT has increased its dividend every year since it came public in 2017, including by another 3.6% earlier this month. It now yields 3.6% at its recent share price of less than $35.
Invitation Homes should be able to continue increasing its dividend. It's benefiting from strong demand for rental housing (it's currently about $1,000 cheaper to rent a home than buy one in its core markets), which is driving steady rent growth. Meanwhile, the REIT is growing its rental property portfolio and recently launched a third-party management platform.
For example, it has contracts with leading homebuilders to buy around 2,500 new homes. The landlord has also acquired over 1,600 homes through the third quarter of this year for nearly $600 million.
An elite dividend growth stock
NNN REIT focuses on owning freestanding retail properties net leased to growing retailers. That lease structure requires tenants to cover all operating costs, including routine maintenance, real estate taxes, and building insurance. As a result, the REIT collects very stable rental income.
The company offers an attractive dividend yield of 5.7% at its recent stock price of around $40 a share. NNN REIT has an elite dividend growth track record. It reached the milestone of 35 consecutive years of increasing its dividend in 2024. Only two other REITs and less than 80 publicly traded companies in the U.S. have achieved that feat.
NNN REIT routinely buys additional income-generating retail properties. It typically buys properties through existing tenant relationships (72% of its acquisition volume since 2007).
The REIT will purchase additional properties in sale-leaseback transactions, providing its tenants with the capital to continue growing their retail footprints. The retail REIT has a conservative balance sheet, giving it ample financial flexibility to continue expanding its portfolio.
High-quality dividend growth stocks
REITs have historically been excellent dividend growth stocks. They generate relatively stable rental income, which grows as they expand their portfolios. That allows them to pay rising dividends.
Sun Communities, Invitation Homes, and NNN REIT have demonstrated this over the years. The trio of REITs have strong dividend growth track records, which seems likely to continue. That makes them look like no-brainer dividend stocks to buy right now for those with a couple of hundred dollars to spare.
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Matt DiLallo has positions in Invitation Homes and Sun Communities. The Motley Fool has positions in and recommends Invitation Homes. The Motley Fool recommends Sun Communities. The Motley Fool has a disclosure policy.
