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The real estate investment trust (REIT) sector has been hit hard by rising interest rates. That makes sense, since higher rates will directly increase operating costs. Rising rates have also made lower-risk income options, like CDs, more competitive. But conservative long-term investors should probably see the current weakness as an opportunity. While their stocks remain moribund, it would be a good idea to check out Realty Income (NYSE: O), NNN REIT (NYSE: NNN), and Agree Realty (NYSE: ADC).

A trio of net lease leaders

The one key factor that ties all three of these REITs together is that they all own single-tenant net lease properties. Net leases require tenants to pay most property-level operating costs. This helps to simplify the operation of the REIT and helps to protect the REIT from rising costs (for things like maintenance). It is one of the most conservative approaches in the REIT sector, assuming that the portfolio of properties is large enough to offset the risk of a tenant loss at any individual property. Realty Income, NNN, and Agree are among the largest net lease REITs you can buy, so tenant risk is minimal.

That said, growth is the big question mark. Higher interest rates increase the cost of capital and that makes it harder to find attractively priced properties. There are two hits on the cost front, with debt costing more and the stock price declines in the REIT sector making equity sales more costly. It is hard to be a net lease REIT today, which is why each of these stocks remain well below their pre-pandemic highs. As property markets adjust, however, it is likely that returns in the net lease sector will rise to the point where the currently high funding costs are largely offset by lower property prices. Assuming that comes to pass, as has happened before, now would be a good time to buy these high-yield stocks.

Realty Income is the industry giant

For more conservative investors, Realty Income is probably the best option. With a market cap of roughly $45 billion, it is by far the largest net lease REIT you can buy. Although retail properties make up most of its portfolio, it also has exposure to industrial assets and a few other unique property types (vineyards and casinos). And it is expanding into Europe, where the net lease model isn't as developed. Add to this that Realty Income is big enough to be an industry consolidator (it just bought peer Spirit Realty), and it seems likely that this REIT will continue to grow over the long term.

As for its key dividend stats, well, they are pretty attractive. The dividend yield is 5.8%. The dividend has been increased for 29 consecutive years. And the dividend rests on an investment-grade-rated balance sheet. If you like to stick with industry-leading names, slow and steady Realty Income is the pick for you.

NNN REIT has a strong playbook

NNN REIT is focused exclusively on North America and exclusively on retail properties. That's worked out well over time, given that the REIT has increased its dividend annually for 34 years. But the really attractive part of the story is how the company sources new properties. Simply put, it focuses on building strong relationships with growing retailers, with roughly 72% of its acquisitions coming out of existing relationships between 2007 and 2023.

This is attractive because it means NNN REIT is growing along with its tenants, which often results in attractive acquisition prices. Growing companies often choose quick, easy, and sure-to-close transactions over making the uncertain effort to maximize sales prices. There's no reason to believe that this approach is suddenly going to stop producing slow and steady growth. NNN REIT's dividend yield is 5.4%.

Agree Realty is a growth story

The last name up is Agree Realty, which has "only" increased its dividend annually since 2013. That's a much shorter record than either of the two REITs above. It is also notable that there was a dividend cut prior to the current increase streak. The company was much smaller when it cut the dividend and it has pretty clearly proven that it has gotten on a stronger growth path.

Like NNN REIT, Agree is retail focused and only invests in North America. But the key reason to choose this particular REIT is that it has been more aggressive on the growth front. That has resulted in much faster dividend growth, as the chart above highlights. While pushing the accelerator a bit harder probably increases risk a bit, given the fairly conservative nature of the net lease approach, that probably shouldn't bother most investors. The yield is 5.2%.

Big, reliable, or fast-growing?

Among REITs today, the net lease niche is notably out of favor. There are a lot of different options in the space, but Realty Income, NNN REIT, and Agree Realty stand out from the pack. Realty Income is the industry giant and a good fit for conservative investors. NNN REIT has a proven track record based on a reliable business approach. And Agree is the growth story. One is likely to be a good fit for your dividend portfolio in March.

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Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.