Updated on September 25th, 2023 by Bob Ciura
Stocks with very long streaks of dividend increases are appealing because they generate stable earnings, and pay reliable dividends, even during recessions.
Not many companies have resilience during economic downturns, so investors must be careful when selecting which dividend stocks to own for the long term.
One group of stocks that has stood the test of time is the Dividend Kings, a set of just 50 stocks with at least a half-century of consecutive dividend increases.
You can see all 50 Dividend Kings here.
You can also download an Excel spreadsheet with the full list of Dividend Kings (plus important metrics such as price-to-earnings ratios and dividend yields) by clicking on the link below:
Federal Realty Investment Trust (FRT) is a Dividend King that has 56 consecutive years of dividend increases.
This streak would be impressive for any stock, but for a REIT (a sector which is notoriously susceptible to recessions) this streak is extraordinary.
In fact, Federal Realty is the only REIT on the Dividend Kings list.
Below, we’ll take a look at Federal Realty’s business and its prospects for continuing its dividend streak.
Business Overview
Federal Realty was founded in 1962 and since that time, it has grown into a large retail-focused REIT that operates in high income, densely populated coastal markets in the U.S.
Related: You can see Sure Dividend’s REIT list here.
The trust sees these markets as having favorable demographics for the long term in terms of population and income growth.
Source: Investor presentation
This strategy of owning premium properties in premium markets has served the trust well, and it has grown steadily over the years.
Federal Realty also has a highly diversified property portfolio. No single tenant represents more than 2.7% of Federal Realty’s annualized base rent, or ABR. It has only 8 tenants with greater than 1% exposure.
Federal Realty has more than 3,300 tenants in 102 properties, which represents a high level of diversification in terms of both tenants and geographic markets.
Growth Prospects
Federal Realty reported Q2 earnings on August 2nd, 2023. For the quarter, FFO-per-share of $1.67 beat analyst estimates by $0.05. Revenue of $280 million grew 6.3% year-over-year and beat estimates by a little over $4 million. The portfolio was 92.8% occupied at the end of the second quarter, an increase of 80 basis points year-over-year.
For the remainder of 2023, Federal Realty now sees FFO-per-share in a range of $6.46-$6.58.
Federal Realty’s growth moving forward will be comprised of a continuation of higher rent rates on new leases and its impressive development pipeline fueling asset base expansion. Margins are expected to continue to rise slightly as it redevelops pieces of its portfolio and same-center revenue continues to move higher.
Competitive Advantages & Recession Performance
Federal Realty’s competitive advantage is in its development pipeline, as well as its focus and relative dominance of very attractive markets.
The trust has proven over time it can produce industry-leading average base rents and that is because it has proven extremely adept at selecting and developing the best properties in the U.S.
Another competitive advantage is the trust’s strong balance sheet, which stands out among REITs. FRT has a solid credit rating of BBB+ from Standard & Poors, and Baa1 from Moody’s. It also has sufficient liquidity with $1.3 billion cash and undrawn credit facility at the end of the second quarter.
Federal Realty’s FFO-per-share during the Great Recession can be seen below:
- 2007 FFO-per-share: $3.62
- 2008 FFO-per-share: $3.85 (6.4% increase)
- 2009 FFO-per-share: $3.51 (8.8% decrease)
- 2010 FFO-per-share: $3.88 (10.5% increase)
The REIT saw only a small decline in FFO-per-share in 2009, and quickly recovered after the recession ended.
Federal Realty expects to generate FFO-per-share of $6.52 in 2023, using the midpoint of guidance. As a result, the REIT is expected to have a dividend payout ratio of 67% for 2023 in terms of FFO-per-share.
This indicates a sustainable dividend for a REIT. It also has sufficient room to continue increasing the dividend each year going forward.
Valuation & Expected Returns
At the current share price of $92, and using $6.52 in expected FFO-per-share for 2023, FRT stock is trading at 14.2 times FFO estimates. Meanwhile, our fair value P/FFO estimate for Federal Realty is 15, which means we view the stock as slightly undervalued today.
If the P/FFO ratio expands to 15 over the next five years, annual returns would be increased by approximately 1.1% per year. Therefore, valuation is expected to be a small boost to FRT’s future returns.
In addition, FRT has expected FFO-per-share growth of 4.3% per year, plus the current high dividend yield of 4.7%. Total returns are expected to reach 10.1% per year over the next five years.
Fortunately, FRT stock still has wide appeal as a dividend growth investment.
Source: Investor Presentation
The trust has an unparalleled track record among REITs when it comes to dividend growth.
Overall, the expected annual returns above 10% give FRT a buy recommendation from Sure Dividend.
Final Thoughts
Federal Realty has had its share of challenges over the years, due to multiple recessions and the coronavirus pandemic. Despite this, Federal Realty maintains a 56-year history of annual dividend increases, a feat unmatched in the REIT sector.
FFO-per-share growth should be reasonably strong given the trust’s business model. And, the dividend payout appears secure.
We rate shares of Federal Realty as a buy due to 10%+ expected annual returns.
The following articles contain stocks with very long dividend or corporate histories, ripe for selection for dividend growth investors:
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~400 stocks with 10+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
- The Best DRIP Stocks: The top 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
- The High ROIC Stocks List: The top 10 stocks with high returns on invested capital.
- The High Beta Stocks List: The 100 stocks in the S&P 500 Index with the highest beta.
- The Low Beta Stocks List: The 100 stocks in the S&P 500 Index with the lowest beta
- The Complete List of Russell 2000 Stocks
- The Complete List of NASDAQ-100 Stocks