Key Points
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Having raised its dividend for 59 consecutive years, Federal Realty Investment Trust is the only REIT to attain Dividend King status.
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With a nearly 4% forward dividend yield, its payouts are practically 4 times that of the S&P 500.
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Between its focus on high-quality properties, as well as its sustainable dividend policy, this REIT has the potential to both remain a Dividend King and continue to reinvest and grow its property portfolio.
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The S&P 500 (SNPINDEX: ^GSPC) currently has a dividend yield of around 1%. Investing in the S&P 500 via index funds has historically produced solid long-term total returns, but for income investors, it’s not necessarily the right vehicle for their specific objectives.
However, don’t assume you need to trade stability for yield. Among Dividend Kings, or stocks with 50 years or more of consecutive dividend growth, there are stocks yielding considerably more than the market index.
A prime example of this is with Federal Realty Investment Trust (NYSE: FRT). Currently trading for around $116 per share, this real estate investment trust (REIT) has a nearly 4% forward dividend yield, practically quadruple that of the S&P 500.
Portrait of a venerable REIT stock
Federal Realty Investment Trust was one of the first REITs. It was founded in 1962, not too long after legislation allowing for REITs was first signed into U.S. law. Having raised its dividend for 59 consecutive years, it’s one of the Dividend Kings, the first and, for now, only REIT to hold this status.
Why has this REIT achieved this status, while other REITs, including those formed at the same time as Federal Realty Investment Trust, have not? Chalk it up to its focus on high-quality retail properties, located in markets such as Boston, New York, Washington, D.C., Silicon Valley, and Southern California, markets known for high real estate values, land scarcity, and, as this REIT itself puts it, “high barriers to entry.”
A look at Federal Realty Investment Trust’s latest financials underscores its status. In the quarter ending June 30, 2026, the REIT reported overall portfolio occupancy of 93.8% and a leased rate of 96.1%. Core funds from operations (FFO), the REIT equivalent of adjusted operating cash flow, increased 6.8% year over year. Reported Nareit FFO declined by 1.6%, but only because of a one-time tax-related item that raised reported results during Q2 2025. In the Q2 2026 earnings release, management inched up guidance and announced plans to increase its regular quarterly cash dividend by 3%.
The takeaway for all investors
For income investors, Federal Realty Investment Trust offers a nearly 4% yield, with a dividend growth track record suggesting its yield on cost will gradually rise over time. Add in the impact of inflation and redevelopment on this REIT’s value over time, and there’s strong potential for long-term capital appreciation as well.
This latter opportunity makes this a REIT for investors focused more on capital growth than portfolio income. In terms of dividend sustainability, with core FFO to come in between $7.48 and $7.56 per share this year, against $4.64 per share in total annual dividends, the stock effectively has a forward payout ratio of between 61% and 62%, leaving the REIT well positioned to keep paying investors quarterly, all while reinvesting and growing its property portfolio.
That said, it’s not as if this REIT is a no-risk alternative to the S&P 500. Dividend growth has slowed in recent years. The 2020s rate hikes both negatively affected stock price performance and increased interest expenses, weighing on the bottom line. Nevertheless, normalizing macro conditions could temper these risks, getting dividend growth and price appreciation back on track.
Should you buy stock in Federal Realty Investment Trust right now?
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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