You won’t want to miss these 3 under-the-radar dividend stocks

Hundreds of companies pay dividends, making it easy to miss out on some great dividend stocks. Many smaller companies that are not big enough to be in S&P 500 tend to fall under the radar of most investors.

Rexford Industrial Realty (REXR -0.80%), Equity LifeStyle Properties (ELS -0.76%)and NNN REIT (NNN -0.97%) are smaller real estate investment trusts (REITs). Because of this, many investors miss how good they are at paying dividends. Here’s why it deserves a closer look.

His focused strategy pays off big DIVIDENDS

Rexford Industrial Realty is a Industrial REIT focused on one market: Southern California. The market has tremendous fundamentals. It is the largest industrial market in the country and consistently has the highest demand with the lowest supply. These factors are keeping occupancy levels high while driving strong rent growth, which has helped generate strong performance for Rexford over the past few years.

Its funds from operations (FFO) have grown at a compound annual growth rate (CAGR) of 16% over the past five years. That’s much faster than THE 9% CAGR among his fellows, contributing to faster dividend growth (18% CAGR over the past five years, compared to 10% for its peers).

Rexford Industrial has built-in substantial whole growth factors. A combination of repositioning and redevelopment projects, rent increases and recently announced acquisitions will add 35% to its annual net operating income over the next three years. This lays a solid foundation for continued dividend growth from a payout that already yields more than 3%. Meanwhile, there is potential for further growth from future increased acquisitions, which would increase even more its ability to continue growing its dividend.

Getting off the beaten track has paid off big DIVIDENDS

Equity LifeStyle Properties is a Residential REIT focused on manufactured home communities, RV resorts, campgrounds and marinas. Fewer real estate investors are focusing on those niche property types, which leaves less competition to purchase properties when they come on the market. This allowed the REIT to earn higher investment returns through a larger upfront cost real estate cap rate.

The fundamentals in those niche sectors are strong and sustainable. SHifTinG a prefabricated house is expensive, which allows Equity LifeStyle to increase rents every yeareven during a recession. Because of this, it has grown its net operating income at a higher rate over the years (4.4% annually, compared to 3.3% for the REIT industry since 1998).

These factors have contributed to Equity LifeStyle’s strong dividend growth rate. The REIT has grown its payout at a compound annual rate of 21% since 2006. With a strong balance sheet and solid market fundamentals, Equity LifeStyle is in an excellent position to continue to grow 2.7% – yield dividend in the future.

A remarkable record

NNN REIT has quietly achieved an amazing record of dividend growth. The retail REIT recently posted its 35th consecutive annual dividend increase. It is a rare feat. Only two other REITs and fewer than 80 publicly traded companies have reached this milestone.

The REIT strategy is very simple and consistent. A single tenant is being purchased net leasing retail properties. It focuses on well-located properties leased to growing national and regional retailers such as auto service locations, convenience stores and restaurants. The net lease structure provides predictable cash flow because tenants cover all operating expenses, including routine maintenance, building insurance and property taxes.

NNN The REIT grows by acquiring retail properties that generate additional income, primarily through existing tenant relationships. These trades have higher cap rates than market/auction trades, improving of the company return on investment. It has a low dividend payout ratio and a very conservative balance sheet, giving it plenty of flexibility to continue making incremental property purchases as opportunities arise. These transactions should allow the REIT to continue to grow steadily 4.8% yield dividend.

Small but mighty

Rexford Industrial Realty, Equity LifeStyle Properties and NNN REITs are smaller companies that many investors may have overlooked. Because of this, they have missed out on the extraordinary track record of dividend growth. It should be able to continue to increase its payout, which could make it a great addition to any investor’s income portfolio.