The markets are experiencing significant uncertainty as a result of both geopolitical issues and economic concerns, which have led to volatility in stock prices. Notably, the S&P 500 has fallen into correction territory, often seen as a precursor to a potential bear market.
For investors seeking more stable investments, a retail landlord offering a 4.5% dividend yield could be worth considering. Federal Realty Investment Trust, known for its 57 consecutive years of dividend increases, is recognized as a Dividend King. This distinction places it as the leading real estate investment trust (REIT) in terms of dividend streaks, outpacing other REITs by nearly two decades.
Despite its impressive dividend history, Federal Realty is not a particularly large REIT. The company emphasizes quality over quantity, typically maintaining ownership of about 100 well-located properties. These properties are primarily retail-focused, including strip malls and mixed-use assets, situated in densely populated and affluent regions. The average density and income levels of its property locations exceed those of its competitors, attracting retailers to these prime sites.
Federal Realty’s resilient business model, underscored by its Dividend King status, offers stability for investors concerned about market volatility. The company’s consistent 4.5% dividend provides a reliable return amidst fluctuations in landmark indices like the S&P 500.
The REIT demonstrated notable resilience during economic downturns, including the recent pandemic-induced recession, when mandatory non-essential business closures impacted operations. Federal Realty leveraged this period to strategically acquire properties in markets like Phoenix, Arizona, at favorable prices, setting the stage for future redevelopment and value enhancement.
Historically, Federal Realty’s performance during the 2007-2009 Great Recession further exemplifies its robustness. While its peer group experienced a decline of 2.1% in funds from operations (FFO) in 2008, Federal Realty’s FFO bucked the trend, growing by 7.5%. Even as the economic crisis deepened in 2009, Federal Realty’s FFO dipped only slightly by 2.8%, in stark contrast to the 33.2% decline seen by its peers. Subsequent years saw Federal Realty’s FFO rebound more robustly than the peer average.
Federal Realty’s ability to navigate challenging economic conditions sets it apart, continuing to grow its dividend during major downturns. As market uncertainties persist, Federal Realty’s historical performance may appeal to investors seeking a reliable addition to their portfolios.
