3 Safe Dividend Stocks Set To Outperform the S&P 500

2022 has been a tough year for investors. High inflation and market volatility have made it increasingly challenging to earn a positive return. Investor sentiment is improving, resulting in an impressive rally this past July, but the S&P 500 is still down around 13% year to date and 4% over the past year.

Investors looking for some consistency, safety, and growth opportunities in the stock market may feel defeated, but there are several stocks well on their way to outperforming the S&P 500.

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W.P. Carey (WPC 0.60%), Agree Realty (ADC 0.27%), and Realty Income (O 0.47%) are not only safe dividend stocks, having boasted decades of consistent dividend increases with healthy balance sheets, but they are also outperforming the S&P 500.

Here’s a closer look at each real estate investment trust (REIT) and why these dividend stocks should continue to lead the way.

1. Safety through diversification

It doesn’t matter if you’re an individual investor or a big-time REIT; diversifying your investments is a smart way to safeguard a portfolio. That is exactly what W.P. Carey does.

The net lease REIT owns 1,390 different properties such as retail, industrial, warehouses, self-storage facilities, and office buildings, along with others across the globe. Its tenants include investment-grade companies like U-Haul, Extra Space Storage, and Marriott, as well as smaller, more localized companies and government agencies.

Over its two decades of operation, this REIT is known for its consistency. It has slowly but consistently grown its portfolio, revenue, and dividends — all while paying above-average dividend yields and not compromising shareholder value. Since going public in 1998, the company has raised its dividends every year, meaning it’s just one year away from becoming a Dividend Aristocrat, a title only three other REITs hold.

Its portfolio occupancy rate is 99% right now, one of the best in the entire REIT industry, and its latest earnings showed positive gains for all key metrics of a REIT: its funds from operations (FFO), net operating income (NOI), and revenue. The stock is up just over 3% this year and is paying around a 5% dividend yield.

2. An agreeable way to grow your money

Agree Realty is a lesser-known retail REIT that owns, develops, and leases over 1,600 retail shopping centers across the country. While perhaps not on many investors’ radar, the REIT has delivered impressive results since going public in 1994, producing a nearly 13% total annualized return — 3% over the S&P 500 during that same time.

Roughly 67.5% of its tenants are investment-grade, including big-name operators like Walmart, Home Depot, Dollar General, and Best Buy, among many others. Its top tenants by annualized base rent (ABR) fall into the essentials category, operating things like tire and service centers, grocery stores, or home improvement stores. Agree Realty also has a small but growing portfolio of ground leases, one of the safest lease structures in the real estate industry.

Like W.P. Carey, Agree Realty is known more for its slow but steady growth, but recent acquisitions are helping the company’s growth rate accelerate. The REIT has added 228 new retail centers to its portfolio for a total of $860 million this year alone, with 21 active developments underway.

Its latest earnings report showed impressive growth as well, with FFO up just under 10% and net income up around 32%. Its strong performance as of late and reliable dividend history have pushed shares up just under 8% this year. The company just increased its dividend by 7.8%, meaning investors can look at a 3.5% yield today.

3. A passive income record to be proud of

Realty Income is arguably one of the safest and most reliable passive income payers to choose from these days. The REIT, which pays monthly dividends, has over 53 years of operation, put through 116 consecutive dividend (making it a Dividend Aristocrat), and is the largest net lease REIT in the industry, owning or having an interest in over 11,000 properties across the globe.

Over the past 20 years, it’s produced a 15% total annualized return, far outperforming the S&P 500. While its past performance may not offer much solace for new investors, there’s reason to believe the REIT still has a rich future ahead.

In 2021, it spent $84 billion on new acquisitions, and year to date, it has spent $60 billion. International opportunities are what’s fueling its growth, in addition to new asset classes, like the purchase of Encore Boston Harbor (Encore) Resort and Casino. Its safe payout ratio of 73% and reasonable debt-to-EBITDA ratio of 5.2 put it in a great financial position.

The stock is up by 2% this year, which isn’t much, but that sure beats out most other stock returns right now. And given that its dividend yield is 4% — nearly three times higher than the S&P 500’s payout — it’s a clear winner among dividend stocks.

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