Comparing Two REIT Investment Opportunities: Which One Delivers Better Returns?

Understanding the REIT Dividend Advantage

For income-focused investors, real estate investment trusts present a compelling structure. By law, REITs must distribute at least 90% of taxable income to shareholders through dividends. The mechanism is straightforward: REITs acquire properties, lease them to tenants, and pass rental income to investors.

Retail properties have emerged as a major REIT focus area. While e-commerce concerns and rising interest rates created challenges in recent years, the sector has shown remarkable resilience. Through the first three-quarters of 2025, retail-focused REITs generated average returns of 6.9%, demonstrating investor confidence in properly managed investment properties.

Two Leading Contenders: Scale vs. Agility

Realty Income: The Established Giant

With over 15,540 properties generating steady cash flow, Realty Income captures roughly 80% of rental revenue from retail tenants. The portfolio spans dollar stores (10%), grocery anchors (11%), home improvement retailers, and convenience locations. The remaining exposure comes from industrial, gaming, and other property types.

Operationally, the company maintains a 98.7% occupancy rate with lease renewals averaging 3.5% higher rates. This efficiency translates to adjusted funds from operations (AFFO) of $1.09 per diluted share, a 2.9% year-over-year increase.

The dividend story impresses: three decades of consecutive annual increases, with monthly distributions. The October payout increased from $0.269 to $0.2695 per share. Management forecasts 2025 AFFO between $4.25-$4.27, substantially exceeding the $3.23 annualized dividend obligation. The 5.7% dividend yield reflects current market pricing.

The drawback of Realty Income’s massive scale: generating meaningful growth becomes challenging. When you already own 15,000-plus investment properties for sale and rent, incremental acquisitions struggle to meaningfully move growth metrics. Investors should anticipate steady income rather than dramatic capital appreciation.

NNN REIT: The Nimble Competitor

Operating approximately 3,700 properties, NNN REIT focuses on convenience retail, automotive services, restaurants, and entertainment venues. This concentrated retail thesis appears effective—the company maintained a 97.5% occupancy rate in Q3.

Financial performance shows momentum: quarterly AFFO per share rose from $0.84 to $0.86. The dividend track record spans 36 consecutive years of increases, with August’s boost reaching $0.60 per share (a 3.4% raise). Management projects full-year AFFO of $3.41-$3.45, providing comfortable dividend coverage. The 5.9% yield slightly exceeds Realty Income’s.

Smaller size creates strategic advantages. NNN’s acquisition capacity directly translates to meaningful growth opportunities. Investment properties added to a 3,700-unit portfolio generate substantially higher percentage returns than additions to Realty Income’s 15,000-plus holdings.

The Strategic Comparison Framework

Both entities demonstrate success navigating a challenging retail landscape by targeting resilient business categories—convenience stores, essential services, and entertainment remain relatively recession-resistant.

Each has earned investor trust through 30+ years of consecutive dividend increases. Their dividend yields cluster within 20 basis points of each other.

The selection ultimately hinges on investor preferences:

Choose Realty Income if: You prioritize diversification and the stability of an established, large-scale REIT with multiple property categories and geographic spread.

Choose NNN REIT if: You seek meaningful growth potential from investment properties and accept concentrated retail exposure for the opportunity to compound gains more substantially over time.

Making Your Decision

Both investment properties generate returns and income, yet they serve different investor needs. Realty Income provides ballast—reliable, consistent returns from a behemoth portfolio. NNN REIT offers the prospect of accelerating growth from a more agile platform.

If forced to select a single position, NNN REIT presents the more compelling long-term opportunity, despite its narrower focus. The smaller base and concentrated retail thesis provide catalysts for compound growth exceeding Realty Income’s constraints.

Investment decisions ultimately depend on your risk tolerance, time horizon, and income requirements. Both remain viable choices for income-focused portfolios.