Dividend Aristocrats In Focus: Federal Realty Investment Trust

With the arrival of 2017 in our calendars, it is now time for the new members of the Dividend Aristocrats to be inducted into the index.

The requirements to be a Dividend Aristocrat are:

  • Be in the S&P 500
  • Have 25+ consecutive years of dividend increases
  • Meet certain minimum size & liquidity requirements

Being a Dividend Aristocrats is an important recognition.

The ability (and willingness) to raise dividends for 25 or more consecutive years demonstrates a wide economic moat, sustainable competitive advantage, and the kind of shareholder-friendly management that enjoys returning capital to shareholders.

You can see all 51 Dividend Aristocrats here.

Federal Realty Investment Trust (FRT) is one of two new Dividend Aristocrats, with February being its first month of inclusion.

FRT was kept from being a Dividend Aristocrat because they were not a member of the S&P 500 Index. Their dividend growth record is well in excess of the 25+ year requirement. In fact, they have the longest record in the entire REIT industry.

FRT Dividend Growth

Source: FRT Third Quarter Investor Presentation, slide 62

FRT has actually raised dividends for 49 consecutive years, which makes them only 1 year away from being a Dividend King (50+ years of consecutive dividend increases).

FRT is now the only REIT to be a Dividend Aristocrat after HCP Inc. (HCP), a healthcare REIT, reduced their dividend due to a spin-off.

It is uncommon for REITs to have long streaks of dividend increases because they are legally obliged to pay 90%+ of their earnings as dividends. This leaves little retained earnings to fund future growth, which makes FRT’s dividend growth streak even more impressive.

Historically, FRT has delivered above-market returns to shareholders. The company’s total returns over the past decade are compared against the S&P 500 in the following diagram.

FRT Growth of $1 Investment Over 10 Years

Source: Yahoo! Finance

This post will analyze the investment prospects of FRT in detail.

Business Overview

Federal Realty Investment Trust is a REIT focusing on commercial retail properties.

The REIT aims to differentiate themselves by targeting markets that are densely populated with affluent individuals.

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