When you think about REITs (real estate investment trusts) and dividend growth, a certain REIT known for making dividend payments monthly, Realty Income (O 2.95%), may be what first comes to mind. Yet while Realty Income has indeed built up a strong dividend growth track record, but it's still decades away from becoming one of the Dividend Kings.
However, among REIT stocks, there is already a Dividend King, with over 50 consecutive years of dividend growth -- 58 years, to be exact. I'm talking about Federal Realty Investment Trust (FRT 0.94%). Since the late 1960s, during good times and challenging times, Federal Realty Investment Trust has steadily increased its cash distributions each year.
NYSE: FRT
Key Data Points
For income-focused investors, retirees in particular, this may be a top stock to consider, given its potential to generate significant investment income during one's golden years.
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Federal Realty Investment Trust is one of the original REITs, and has stood the test of time
Headquartered in North Bethesda, Maryland, Federal Realty Investment Trust was one of the first REITs created, when formed in 1962. Just two years prior, Congress authorized the creation of REITs, which for the first time enabled individual investors the ability to invest in large diversified real estate portfolios.
REITs also have certain tax advantages over traditional corporations, namely the ability to pass through their real estate income to investors, rather than having it taxed at the corporate level. This enables a more efficient distribution of income to shareholders, and is what enables REITs to provide such relatively high dividends, which with REITs are technically known as distributions.
Many of the original REITs formed in the 1960s have by now either merged with other REITs or have liquidated. For this REIT, however, not only has it survived, it has scaled up into one of the largest U.S.-listed REITs. Also, as noted, Federal Realty Investment Trust has built up the longest dividend growth track record among REITs.
These factors are a testament to the strength of its real estate investment strategy. Focused on the ownership of retail shopping centers in high-demand markets, Federal Realty's portfolio has experienced a high level of price appreciation, with the steady increase in rental income over time providing the ability to increase cash distributions each year.
How a $1.5 million investment could fund your retirement
Admittedly, building a diversified portfolio is important when building a retirement nest egg. As the old adage goes, never put your eggs in one basket. However, hypothetically, if one were to pick one stock to fund an average retirement, producing around $5,000 in monthly income, Federal Realty Investment Trust could make for a great choice.
Currently, this REIT has a forward dividend yield of 4.52%. Hence, $1.5 million invested into this REIT would produce dividend income of approximately $67,800 annually. Again, this is in line with current consensus about what amount of monthly income is enough for the average U.S. retirement.
Better yet, assuming that Federal Realty Investment Trust continues to grow its distributions in line with historical averages, this dividend income would continue to grow over time, keeping up with inflation.
Last month, the REIT implemented its dividend increase for 2025, raising quarterly payouts by around 2.7%, from $1.10 to $1.13 per share. In recent years, dividend increases have also been in the low-single-digit range. While that may not sound like much, the REIT's current dividend growth policy is likely highly sustainable, and will enable it to continue regularly raising payouts for decades to come.
Should you buy Federal Realty Investment Trust?
Don't get me wrong: You don't have to be a retiree or prospective retiree to consider Federal Realty Investment Trust a great opportunity. For investors looking for real estate exposure in their portfolios, this REIT makes for a strong choice.
This is due to the REIT's asset quality, strong balance sheet, and its dividend growth track record. That said, if capital growth rather than income is your main focus, consider it to buy Federal Realty Investment Trust on pullbacks.
Like REITs in general, this REIT's shares are highly sensitive to changes in market sentiment. For example, last April, when stocks turned volatile following the tariff hikes, this $97-per-share stock dipped to prices nearing $80 per share. As uncertainty remains high, another such opportunity could arise again in the near future.
