Up to date on October twenty eighth, 2024 by Felix Martinez
Shares with very lengthy streaks of dividend will increase are interesting as a result of they generate secure earnings, and pay dependable dividends, even throughout recessions.
Not many firms are resilient throughout financial downturns, so traders have to be cautious when deciding on dividend shares to personal for the long run.
One group of shares that has stood the take a look at of time is the Dividend Kings, a set of simply 50 shares with at the very least a half-century of consecutive dividend will increase.
You’ll be able to see all 53 Dividend Kings right here.
It’s also possible to obtain an Excel spreadsheet with the total listing of Dividend Kings (plus essential metrics corresponding to price-to-earnings ratios and dividend yields) by clicking on the hyperlink under:
Federal Realty Funding Belief (FRT) is a Dividend King that has 57 consecutive years of dividend will increase.
This streak could be spectacular for any inventory, however it’s extraordinary for a REIT (a sector notoriously prone to recessions).
In reality, Federal Realty is the one REIT on the Dividend Kings listing.
Beneath, we’ll study Federal Realty’s enterprise and its prospects for persevering with its dividend streak.
Enterprise Overview
Federal Realty was based in 1962, and since then, it has grown into a big retail-focused REIT that operates in high-income, densely populated coastal markets within the U.S.
Associated: You’ll be able to see Positive Dividend’s REIT listing right here.
The belief sees favorable demographics for the long run by way of inhabitants and earnings progress in these markets.
Supply: Investor presentation
This technique of proudly owning premium properties in premium markets has served the belief properly, and it has grown steadily over time.
Federal Realty additionally has a extremely diversified property portfolio. No single tenant represents greater than 2.7% of Federal Realty’s annualized base lease or ABR. It has solely 8 tenants with larger than 1% publicity.
Federal Realty has greater than 3,300 tenants in 102 properties, which represents a excessive stage of diversification by way of each tenants and geographic markets.
Development Prospects
Federal Realty reported its second quarter 2024 monetary outcomes, showcasing sturdy progress and enlargement. Internet earnings obtainable to frequent shareholders elevated considerably to $1.32 per diluted share, up from $0.72 within the prior yr. The corporate’s funds from operations (FFO) reached $1.69 per diluted share, a slight enhance from $1.67 in 2023. This era additionally noticed a document leasing quantity, with 122 leases signed for 594,361 sq. toes of comparable retail area, representing money foundation rollover progress of 10% and a 23% enhance on a straight-line foundation. Portfolio occupancy improved to 93.1%, and the leased charge rose to 95.3%.
The quarter included energetic acquisition and divestment methods, with FRT investing $275 million in two belongings totaling 880,000 sq. toes. Moreover, the corporate offered its remaining belongings on Santa Monica’s Third Road Promenade for $103 million, enhancing its deal with high-performing properties. Federal Realty additionally raised its quarterly dividend to $1.10 per share, marking 57 consecutive years of dividend progress—an unparalleled document within the REIT sector. The rise underscores the corporate’s dedication to delivering worth to shareholders and additional solidifies its monetary basis.
In response to favorable efficiency tendencies, Federal Realty up to date its 2024 monetary steerage, elevating its earnings per share vary to $3.33–$3.51 and FFO steerage to $6.70–$6.88 per diluted share. CEO Donald Wooden highlighted the strong leasing demand and regular progress as indicators of the corporate’s ongoing attraction and energy. The issuance of the 2023 Sustainability Report additionally displays FRT’s dedication to sustainable progress, reinforcing its market place as a number one REIT.
Federal Realty’s progress transferring ahead will comprise a continuation of upper lease charges on new leases and its spectacular growth pipeline fueling asset base enlargement. Margins are anticipated to proceed to rise barely because it redevelops items of its portfolio, and same-center income will proceed to maneuver increased.
Aggressive Benefits & Recession Efficiency
Federal Realty’s aggressive benefit is in its growth pipeline and its focus and relative dominance of very engaging markets.
The belief has confirmed that, over time, it may produce industry-leading common base rents as a result of it has confirmed extraordinarily adept at deciding on and creating the very best properties within the U.S.
One other aggressive benefit is the belief’s sturdy stability sheet, which stands out amongst REITs. FRT has a strong credit standing of BBB+ from Customary & Poors, and Baa1 from Moody’s. It additionally has adequate liquidity, with $103 million in money on the finish of the second quarter.
Federal Realty’s FFO-per-share in the course of the Nice Recession could be seen under:
2007 FFO-per-share: $3.62
2008 FFO-per-share: $3.85 (6.4% enhance)
2009 FFO-per-share: $3.51 (8.8% lower)
2010 FFO-per-share: $3.88 (10.5% enhance)
The REIT noticed solely a small decline in FFO-per-share in 2009, and shortly recovered after the recession ended.
Federal Realty expects to generate an FFO-per-share of $6.79 in 2024, utilizing the midpoint of steerage. Consequently, the REIT is anticipated to have a dividend payout ratio of 65% for 2024 by way of FFO-per-share.
This means a sustainable dividend for a REIT. There’s additionally enough room to proceed rising the dividend annually going ahead.
Valuation & Anticipated Returns
On the present share worth of $113, and utilizing $6.79 in anticipated FFO-per-share for 2024, FRT inventory is buying and selling at 16.6 occasions FFO estimates. In the meantime, our truthful worth P/FFO estimate for Federal Realty is 12, so we view the inventory as overvalued right now.
If the P/FFO ratio contracts to 12 over the following 5 years, annual returns could be decreased by roughly 6% per yr. Subsequently, valuation is anticipated to be a headwind to FRT’s future returns.
As well as, FRT has anticipated FFO-per-share progress of 4.3% per yr, plus the present excessive dividend yield of three.9%. Complete returns are anticipated to succeed in 2.2% per yr over the following 5 years.
Happily, FRT inventory nonetheless has large attraction as a dividend progress funding.
Supply: Investor Presentation
The belief has an unparalleled monitor document amongst REITs by way of dividend progress.
General, the anticipated annual returns above 2.2% give FRT a promote suggestion from Positive Dividend.
Ultimate Ideas
Federal Realty has confronted challenges over time, together with a number of recessions and the coronavirus pandemic. Regardless of these, Federal Realty maintains a 57-year historical past of annual dividend will increase, a feat unmatched within the REIT sector.
Given the belief’s enterprise mannequin, FFO-per-share progress must be moderately sturdy. The dividend payout seems safe.
We charge shares of Federal Realty as a promote on account of 2.2%+ anticipated annual returns.
The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend progress traders:
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