Key Points
Federal Realty is a retail-focused REIT.
It is the only REIT to have achieved Dividend King status.
Federal Realty’s yield is an attractive 4.6%.
10 stocks we like better than Federal Realty Investment Trust ›
There are different ways to invest. Some require taking on a lot of risk, and some seemingly require very little risk. If you are a dividend investor like me, you’ll probably lean toward the low-risk camp when you try to find income stocks for your portfolio. And that’s why I think you’ll love Federal Realty (NYSE: FRT) and its attractive 4.6% dividend yield. Here’s why this retail-focused real estate investment trust (REIT) could set you up for a lifetime of growing dividends.
How attractive is Federal Realty’s dividend and dividend record?
The S&P 500 index (SNPINDEX: ^GSPC) is yielding around 1.3% right now. The average REIT has a yield of 4.1%. So on a relative basis, Federal Realty’s 4.6% dividend yield stands out as attractive.
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But Federal Realty has increased its dividend annually for 57 consecutive years. That makes this REIT a Dividend King. Dividend Kings constitute a highly elite group of companies that have increased their dividends annually for at least five decades. If you are looking for a reliable dividend stock, starting with the list of Dividend Kings is a great choice. The only REIT on that list is Federal Realty, which clearly sets it apart from the rest of the REIT sector in a very positive way.
If you are looking for a high-yield stock that you can count on to keep paying you for the rest of your life, Federal Realty is an investment option that you need to know about.
What does Federal Realty do?
As noted, Federal Realty is a REIT that is focused on retail properties. Retail is actually a pretty broad segment of the property market. Federal Realty’s focus is on strip malls and mixed-use developments, with a retail core. These are properties that consumers visit on a regular basis to fulfill basic needs. For example, strip malls usually contain grocery stores that are surrounded by smaller local stores, like hair salons. Federal Realty isn’t the only REIT in the space.
What sets Federal Realty apart is its focus on quality over quantity. It only owns around 100 or so properties, but they are among the best properties in the markets it serves. On average, the REIT’s properties have larger populations and greater wealth than its peers. But that isn’t the whole story, either.
Federal Realty is an active manager of its portfolio. That means it is always buying and selling properties. More to the point, it is always investing in its properties to make them instantly work to create value. If it believes it has maxed out the value of a property, Federal Realty will sell it — for the right price — so it can buy a property where redevelopment will add more value.
This is how it has achieved such an impressive dividend record. And it is why long-term dividend investors will want to add this standout REIT to their portfolios. Federal Realty isn’t content with just collecting the rent; its goal is constant improvement.
Federal Realty doesn’t go on sale very often
Federal Realty isn’t exactly dirt cheap today; that only happens during really bad economic downturns, like recessions. However, the 4.7% dividend yield on offer today is still pretty attractive, historically speaking. If you want to get paid well for the rest of your life by a reliable dividend stock, Federal Realty should probably be at the top of your list right now. At the very least, put it on your wish list so you have the gumption to buy during the next recession.
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Reuben Gregg Brewer has positions in Federal Realty Investment Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
