This week, four of the portfolio holdings ranked in the Top 10: FMCB, MMM, MO, and TGT.
| Ticker | Account Value |
| FMCB | 2,862.01 |
| MMM | 2,300.23 |
| MO | 2,488.78 |
| TGT | 1,312.10 |
The lowest amount belongs to TGT. However, there are imbalances in the portfolio, from both a stock perspective and a sector perspective, due to the outperformance of TDS in recent weeks. The sector balance can be nearly restored with an investment into Real Estate. There were no such stocks in the Top Ten, but one does finally make the list if the ranking is extended to a Top 13 (we welcome QCOM into the list at this point as well – yes, they’re not in real estate, and are more heavily weighted than TGT, but we can still say hello, can’t we?).
Investing $250 into TGT would alleviate some of the stock imbalance but exacerbate the relative underweighting of Real Estate and so ladies and gentlemen, it is time to add a new position to the Portfolio for the Ages!
NNN REIT Inc
In the top left corner of their home page, NNN REIT has a small menu scrolling from right to left giving one the option to click on some recent news or download their latest annual report. However, a part of that menu is frozen (see below).
In other words, within two seconds of visiting this website, the viewer is immediately made aware of the dividend yield and the 34-year streak of annual dividend increases. This is the regular homepage mind you, not the investor relations page. Hell, even their official logo has the stock exchange on which they are listed right in it. They want you to buy their stock and collect dividends. More proof? Check out their list of milestones.
Of the 11 milestones, 4 are related to dividends (and 2 are related to the exchange they trade on). Not only that, but it also seems they changed their official name to ‘NNN’ just to match their ticker symbol of some 30 years – just so there is no confusion when you show up at the exchange ready to buy1.
Here is the profile from Yahoo! Finance:
NNN REIT, Inc., formerly National Retail Properties, Inc., is a real estate investment trust (REIT). The Company owns a diversified portfolio of freestanding retail stores across the United States. The Company acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and are primarily held for investment (Properties or Property Portfolio). It owns approximately 3,449 properties across 48 states leased to more than 380 tenants in 37 different lines of trade. It invests primarily in retail real estate that is located within each local market for its tenant’s retail lines of trade. The Company’s portfolio includes convenience stores; automotive service; restaurants-full service; restaurants-limited service; family entertainment centers; health and fitness; theaters; recreational vehicle dealers, parts, and accessories; equipment rental; automotive parts; wholesale clubs; home improvement; and furniture, among others.
The Details
Data as of 2023-08-19
| Name | NNN REIT Inc |
| Ticker | NNN |
| Website | Investor Relations |
| Sector | Real Estate |
| Dividend Streak | 34 years |
| Last Price | $38.70 |
| Div Amt (quarterly) | $0.565 |
| Ann Dividend | $2.26 |
| Last Ann Div Inc | 3.5% |
| Dividend Yield | 6.0% |
| Payout Ratio2 (ttm) | 69.4% |
| Beta (5-yr, mon) | 0.87 |
| P/E Ratio2 (ttm) | 12.13 |
| Margin of Safety | 15.5% |
Reasons to Invest
First, NNN is a nice complement to MMM in the Portfolio for the Ages. Joking aside, NNN REIT sold off quite a bit after a solid earnings report, theoretically because the broader market has sold off in August. But the 14% fall over the last 17 trading days has created a nice entry point. That’s really the first reason to get in.
The second, is a 6% dividend with the considerable safety of a 70% payout ratio.
The very first time NNN traded at the level it is trading at right now was April 2013, when earnings, Funds from Operations (FFO), were at 50% of the level they are now.
I will be purchasing 26 shares of NNN on Monday morning.
1I like the idea of actually showing up at a stock exchange to acquire a stock. I’m not sure I’ve ever been politely escorted from a building. It does remind me of the time a young actuary chose to acquire a copy of the updated edition of the ‘Statement of the Financial Accounting Standards Board #106, Employers’ Accounting for Postretirement Benefits Other than Pensions’ directly from the Financial Accounting Standards Board in Norwalk, Connecticut. It was a 5-minute drive from my apartment. I paid in cash, received change from someone sitting in a cubicle, and it was totally worth it. Having that book made my boss jealous.
But I digress, this footnote was meant to say that ‘NNN’ has undoubtedly been chosen first, as the ticker symbol and finally the company name, because this REIT specializes in triple-net leases. An NNN lease (as it is oft written) typically means that three types of expenses related to ownership of real estate are actually passed back to the tenant. This means that NNN REIT collects lower rents because they do not have to pay for property taxes, insurance, and maintenance out of the rent they receive. The net effect (yes, pun intended) is lower risk to NNN REIT.
2I am using funds from operations (FFO) of $3.19 per share over the last twelve months, instead of earnings per share (EPS) as the denominator in the Payout Ratio and the P/E Ratio. For REITs in particular, EPS can be heavily influenced by depreciation and thus, is not useful in these measures.