Federal Realty (FRT 0.10%) is not the largest real estate investment trust (REIT) you can buy. It isn't even the largest REIT in its strip mall niche. It actually has a fairly small collection of properties in its portfolio. And yet it stands head and shoulders above every other REIT when it comes to its dividend. Here's why now is a good time to consider adding Federal Realty and its industry-leading business to your portfolio.
What does Federal Realty do?
Federal Realty owns strip malls and mixed-use properties, which generally include apartments and offices in the mix with retail. Some of the REIT's individual properties are quite large developments with multiyear projects on them. Others are simple strip malls where locals go to meet their everyday needs, like buying groceries or getting a haircut.
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From this perspective, Federal Realty isn't particularly differentiated from its competitors. That changes when you see that it only owns around 100 properties, which is generally a much smaller portfolio than its closest peers. However, those properties are particularly well located, with Federal Realty's assets having a higher average income around them and higher average population density. In other words, its portfolio is focused in wealthy areas with lots of residents nearby, which is exactly where retailers want to be located.
The strength of Federal Realty's portfolio today is highlighted by its occupancy rates. After dipping during the coronavirus pandemic, they are now back above that level and closing in on 20-year highs. Occupancy ended the first quarter of 2025 at 93.6% but is expected to close in on 95% as the year progresses. Even during the pandemic, when non-essential businesses were closed by the government in an attempt to slow the spread of COVID-19, Federal Realty's occupancy didn't fall below 89%.
FRT Dividend data by YCharts
The real story, however, is Federal Realty's dividend, which has been increased annually for 57 consecutive years. That makes the REIT a Dividend King, which alone is an impressive feat. But there's two more nuances here. First, Federal Realty has the longest dividend streak of any REIT. Second, it is the only REIT that is a Dividend King. Having a small, well-positioned portfolio has clearly paid off.
Federal Realty's strength is in development and redevelopment
Federal Realty didn't just buy 100 or so properties 57 years ago and sit on them for half a century. It is actually a quite active buyer and seller of assets. The key to its long-term success is what it does with the assets it buys.
Usually Federal Realty buys well-located properties that need a little love and attention. That could be as simple as a coat of paint and more focus on tenant quality. A refresh of a property's exterior to make it look up to date goes a long way in attracting customers and tenants. But often the capital investments being made are far more extensive.
NYSE: FRT
Key Data Points
Federal Realty will usually add to the properties it buys in some way. That can include adding apartments and offices above street-level retail space. It can involve tearing down an entire property and rebuilding it from scratch. Or it can be as simple as getting the permitting to make changes, which alone adds value to a property. When Federal Realty believes that it can sell a property for an attractive price, it will do so and then go on the hunt for another property that it can work on to improve its value over time.
In other words, Federal Realty's portfolio is in a near-constant state of flux. And the inherent push is for the improvement in the quality of its portfolio. Management knows from experience that well maintained and located properties attract tenants, customers, and buyers, and that is the REIT's guiding star.
A great REIT with an attractive yield
Given the quality of Federal Realty's business model, highlighted by its Dividend King status, the shares don't go on sale very often. Today the dividend yield is 4.6%, which is notably higher than the S&P 500 index's (^GSPC +0.26%) 1.3% and the average REIT's 4.1%. Federal Realty's yield is also near the high side of the range over the past decade. If you are looking for a reliable dividend backed by a high-performing business, Federal Realty should probably be on your short list today.
