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On an absolute basis, Agree Realty's (NYSE: ADC) 4.7% dividend yield is very attractive when you compare it to the broader market's miserly 1.3% or so. It's even a bit higher than the average real estate investment trust (REIT) yield of nearly 4.3%.

But don't make a final call about this net lease REIT just yet (net leases require tenants to pay most property-level operating expenses). Here are some things to consider when making the buy, sell, or hold decision with Agree Realty.

Buy Agree Realty

You might think that the first reason to like Agree is its dividend yield. Despite the lofty yield relative to the market and the average REIT, that's actually not the case. The most attractive aspect is growth. As 2013 got underway, the REIT owned just 109 properties. By the end of the first quarter of 2024, a decade or so later, its portfolio had expanded to more than 2,150 properties. That's a huge increase, both percentage-wise and on an absolute basis.

That growth has had a very positive effect on the REIT's payout. During the past decade, the dividend's compound annual growth rate was roughly 6%. That's a solid number for just about any company, given that it is roughly twice the historical rate of inflation growth.

But it is a very rapid pace of dividend growth for a net lease REIT, noting that Agree's largest competitor, Realty Income (NYSE: O), has only increased its dividend at an annual rate of about 3.5% during that same 10-year span.

And that is why you buy Agree Realty: for dividend growth supported by continuing business growth. But there's a caveat here. It is much easier to grow rapidly when you have 109 properties than when you have 2,150. So the company will have to work harder for growth at this point or potentially accept slower growth.

Hold Agree Realty

If you bought Agree Realty because of its rapid dividend growth, there's no particular reason to jump ship at this point. Given the strong growth, your yield on purchase price is probably pretty attractive.

Just to put some numbers on that, the stock's highest price in 2013 was $33.85 per share, and the quarterly dividend during that year was $0.41. Today, the quarterly dividend is $0.75, paid in monthly installments of $0.25 per share. That makes the yield on purchase price about 8.9% even if you paid top dollar for the shares way back in 2013.

It wouldn't make much sense to get rid of that kind of income stream unless another investment was significantly more attractive. The problem is that, depending on your goals, you might actually be able to upgrade on the income front thanks to Wall Street's worried reaction to high interest rates.

Sell Agree Realty

The big issue here is that yield on purchase price doesn't show the full picture. That investor who paid $33.85 in 2013 now owns shares worth about $63, or nearly twice as much. So the dividend yield today is 4.7%. And, as noted, the rapid business and dividend growth of the past 10 years is probably going to slow down.

All in, if you sold Agree Realty, you could buy the net lease industry's bellwether, Realty Income, and collect a 5.7% yield.

While that's "only" a 1 percentage point bump in the yield, on a percentage basis, that's a significant increase in the dividend income you'll generate. If your goal is to maximize the income your portfolio generates, it could be hard to resist that kind of additional cash flow.

And it is worth noting that Agree has a roughly 10-year streak of annual increases, while Realty Income's streak is 30 years. If you don't mind slow and steady, given the higher yield, selling Agree and leveling up to Realty Income might not be a bad idea.

Nothing exists in a vacuum

There is nothing wrong with Agree Realty; it is a well-run net lease REIT. You could buy it or hold on to it and probably live the rest of your life quite happily.

But that doesn't mean it is the best choice for every investor. Indeed, after a very strong decade, Agree might have trouble living up to its past growth rates. And if income is your focus, there are high-quality peers with fatter yields to consider, including highly respected industry giant Realty Income.

Should you invest $1,000 in Agree Realty right now?

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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.