The Dividend Aristocrats are an exclusive group of stocks with 25+ consecutive years of dividend growth, and are among the highest-quality stocks an investor can buy. There is an even more exclusive list of dividend growth stocks known as the Dividend Kings, which have increased their dividends for 50+ years in a row.
There is only one Real Estate Investment Trust, or REIT, on the list of Dividend Aristocrats and Dividend Kings: Federal Realty Investment Trust (FRT).
Invest In Real Estate Without Owning Property
Investors might assume that in order to invest in real estate, one must own physical property. But Real Estate Investment Trusts, also known as REITs, offer investors the ability to benefit from real estate without actually owning a building or land.
REITs own properties across a variety of different property types. They benefit from a favorable tax structure, and in return, are required to distribute at least 90% of their taxable income to shareholders in the form of dividends.
Federal Realty primarily owns shopping centers. However, it also operates in redevelopment of multi-purpose properties including retail, apartments, and condominiums. Its major markets are Washington, D.C., New York, Philadelphia, Boston, San Francisco, and Los Angeles. It also has properties in Miami and Chicago as a result of recent expansion.
The trust’s investment strategy is to pursue densely-populated, affluent communities, with high demand for commercial and residential real estate. The strategy has clearly worked to the benefit of the company and its shareholders. Since 2010, Federal Realty increased funds from operation (FFO) by 6% per year, on average.
The most recent quarterly results reflect Federal Realty’s strong property portfolio. Funds-from-operations came in at $1.58 per share against $1.50 in the year-ago quarter, up 5% year over year, as comparable property net operating income grew 3.5%. Tenant additions also help boost growth. Last quarter, Federal Realty signed 101 leases, and leases were made at an average rate of $38.31 per square foot, compared with $36.22 last year. That represents cash basis rollover growth on comparable properties of 6%.
The best REITs like Federal Realty invest in high-quality real estate with strong tenants. Federal Realty collects cash flow from its owned properties, which is then used to acquire new properties. This creates a steady stream of profits that also allow REITs to maintain high dividend yields.
Federal Realty has a current dividend yield of 3.1%, which is significantly higher than the 2% average dividend yield in the S&P 500 Index. In addition, Federal Realty is an excellent dividend grower. The company has increased its dividend each year since 1967. Over the course of its 51-year streak of annual dividend increases, the company raised its dividend by 7% per year, on average.
Federal Realty is a unique stock that combines a high current yield with high dividend growth each year. The company generates more than enough cash flow to continue increasing its dividend going forward. As the only REIT on the list of Dividend Aristocrats and Dividend Kings, Federal Realty is dividend royalty in the real estate industry.
Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.
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