Linked here is a PDF copy of my detailed analysis of National Retail Properties, Inc. (NNN) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Commercial Net Lease Realty, Inc. is a real estate investment trust (REIT) that invests in high-quality, freestanding retail properties subject to long-term net leases with major retail tenants.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. NNN is trading at a discount to 3.) and 4.) above. If I exclude the high and low valuation, and average the remaining two valuations, NNN is trading at a 4.1% discount. NNN has a Star added for trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. NNN earned a Star in 3.) above. It has grown its dividends for 17+ years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. With a current yield of 6.42%, NNN earned a Star for 2.) above since its current yield is in excess of the 4.61% MMA rate. NNN's has a respectable NPV MMA Diff. of $5,614 (per thousand), which is less than the $10,000 threshold needed to earn a Star.
Other: NNN is not a S&P 500 Dividend Aristocrat, but is a member of The Broad Dividend Achievers™ Index. S&P's qualitative risk assessment is low based on NNN's position as a large owner of retail properties, the geographic and customer diversity of NNN's portfolio, and, its strong financial condition. The shareholders will benefit from NNN's position as a large owner of single-tenant properties. These properties are primarily tenanted by large, nationally recognized retailers, under long-term triple net leases, whereby the tenant bears responsibility for substantially all property costs and expenses associated with ongoing maintenance and operation.
Conclusion: Quantitatively, NNN earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of three Stars, which rates it as a 3 Star-Hold stock.
My original investment in NNN was in September 2005. Since then I have added to my position three times with the most recent purchase in February of this year. My annualized return on NNN from Sep/2005 through Friday is +9.9%. Year-to-date it is a loss of -1.2%. I have been well-pleased with NNN's performance and will continue to add to my position as my allocation allows and until circumstances dictate a different coarse of action.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I own shares of NNN (7.0% of my Income Portfolio).
What are your thoughts on NNN?
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Thanks for the analysis. This one has been on my list for further investigation for a while now. It keeps getting bumped down since I own Realty Income and they operate in a similar niche.
Alf: I also hold O. During the time I held NNN and O, NNN has been the stronger performer.
Best Wishes,
D4L
Wow. I just ran the numbers if you had bought in Jan 2003 in both NNN and O your investment in NNN would be worth 21.73% more.
Congrats on your 5.6% raise in NNN dividend.
I looked over the past 18 years worth of dividend data on NNN and what strikes me is the fact that the company could freeze the quarterly dividend payment for 1.5 years, yet its annual dividend payments could still keep on increasing..
ALF: I have some concerns about O, I am just watching it right now.
Dividend Growth Investor: I take it as a positive the way they managed the dividend so that no year showed as flat. it shows me that management is aware of how important it is to maintain their record of dividend increase.
Best Wishes,
D4L
D4L,
I was researching NNN and I read that its DRIP plan allows for a 1%-5% discount on stock purchasing with reinvested dividends. Do you own NNN through a dRIP or have you considered it?
I don't participate in DRIPs since the company paying the dividend may not be the best buy at the time. I accumulate a months worth of dividends and combine it with my regular monthly funds set aside for invesing.
Best Wishes,
D4L