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There are a lot of things to like about Agree Realty (NYSE: ADC), but that doesn't make it the perfect selection for all investors. In fact, if you are dividend lover, you might find its generous 4.8% yield just doesn't get your blood running as much as the 6.3% yield from competitor W.P. Carey (NYSE: WPC). Here's why you might want to pick W.P. Carey over Agree Realty.

Agree has grown rapidly

There's no question that Agree has rewarded investors well over the past decade or so. The net lease real estate investment trust (REIT) has increased its portfolio from 130 properties at the end of 2013 to over 2,100 at the end of the first quarter of 2024.

Over the past 10 years, the dividend has grown at a compound annual rate of roughly 6%, which is pretty fast for a net lease REIT. Net leases require tenants to pay for most property-level operating costs.

By comparison, the largest net lease REIT, Realty Income (NYSE: O), only increased its dividend by about 3.5% a year over the same span. There's no reason to believe that Agree is done growing, either, given that its portfolio is still dwarfed by the over 15,400 properties that Realty Income owns.

But investors are well aware of Agree's success. Its dividend yield of 4.8% is attractive for a REIT, but it isn't nearly as large as some other net lease REITs. Realty Income's yield is 5.9%. And, as noted above, W.P. Carey's yield is 6.3%.

Gearing up for growth at W.P. Carey

There are a couple of things to consider here. First, Realty Income is huge, and slow growth is likely the best investors can expect. Agree isn't as small as it once was, so growth is likely to slow down a little bit from here. And W.P. Carey is in the middle of reshaping its portfolio so that it can grow its business more quickly.

The last of these three options might be the best one for long-term investors looking to balance yield and growth.

The overhaul at W.P. Carey required jettisoning its office portfolio and a dividend cut, which has Wall Street worried about its future. That's fair, but W.P. Carey has already started to raise its dividend again as it attempts to rebuild trust.

That said, the portfolio overhaul (including some other asset sales) will leave W.P. Carey with around $2.8 billion worth of investment capacity. That will allow the REIT to start growing again. That external growth will be augmented by one of the best-positioned lease portfolios, with some 54% of its rental increases tied to inflation.

And then there's the portfolio diversification that W.P. Carey offers. While Agree is laser-focused on U.S. retail properties, W.P. Carey's portfolio includes industrial, warehouse, retail, and a fairly large "other" category.

It also generates around 45% of its rents from outside the United States. There's nothing wrong with focusing on the U.S. retail sector, but from a big-picture perspective, W.P. Carey has many more levers to pull on the growth front.

Basically, if you can stomach riding out the portfolio overhaul at W.P. Carey, you can collect a large yield and growing dividend. And, once the overhaul is complete (likely in 2025), it seems probable that growth will pick up and the dividend will expand at a more rapid clip. In fact, the worst-case scenario appears to be collecting a higher yield.

Agree is fine, but W.P. Carey might be better

Agree Realty is an attractive net lease REIT, offering a generous dividend yield and historically rapid growth. It probably wouldn't be a mistake for an investor focused on dividend growth to buy it.

However, W.P. Carey's turnaround story is playing out as management planned, and the end result is likely to be a faster-growing business. If you are looking to maximize the income your portfolio generates and still have some attractive dividend growth, W.P. Carey might be the better choice today.

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Reuben Gregg Brewer has positions in Realty Income and W. P. Carey. 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.