Founded in 1962, Federal Realty Investment Trust (FRT -0.83%) is not only one of the oldest real estate investment trusts (REITs), it's royalty.
The Bethesda, Maryland-based owner of shopping centers and mixed-use neighborhoods is the only REIT among the 39 companies currently bearing the title of Dividend King. That means they're members of the S&P 500 that have raised their dividends for at least 50 straight years.
So, what have you done for us lately?
In Federal Realty's case, make that 54 straight years, the longest of all REITs. The stock is good for a dividend yield of about 3.71% after raising the payout a penny per share once in each of the past two years, a nice feat while retail REITs were taking a pandemic pounding.
And, as the chart below shows, Federal Realty stock has handily beaten the S&P 500 in total return over the past two decades, a nice accomplishment for a real estate investment and a reliable source of passive income.
And what will you do for us next?
While history's nice, the future's the focus for investors, and Federal Realty's first-quarter earnings reported on May 5 are cause for some celebration.
The company reported that funds from operations (FFO) jumped 28.2% to $1.50 per share from $1.17 in the year-ago quarter. Federal Realty also generated comparable property income growth of 14.5% in the quarter and signed 199 leases during the first three months of the year, the most for that frame in its long history.
Federal Realty also increased its FFO guidance for the year from $5.75-$5.95 per share to $5.85-$6.05 per share, and earnings per share from $2.30-$2.50 to $2.36-$2.56. A payout ratio of a modest 58.23% based on current cash flow also bodes well for continued dividend growth.
The company's portfolio is a balanced affair, with 104 open-air properties at quarter's end, all located in first-ring suburbs in nine major metro markets: Silicon Valley, Southern California, Phoenix, Chicago, Miami, Boston, New York, Philadelphia, and Washington, D.C.
That property mix includes about 3,400 residential units as well as 3,100 retail and office tenants, none representing more than 2.7% of its annual base rent. Restaurants represented 16% of its rent in the first quarter, followed by residential and office at 11% each, and the rest a mix of grocery, household goods, and numerous other retail businesses.
That diversity in relatively affluent markets, along with recent acquisitions and growing occupancy, including among small shop tenants, helps lend confidence to continued dividend growth. Although it's been four straight quarters at that $1.07 a share level, there are still a couple of quarters left this year to keep the streak going.
And with a record like that, and an executive team that averages more than 20 years each with the company, this doesn't seem like a REIT ready to give up its status as not just a Dividend Aristocrat, but its crown as a Dividend King.