A Federal Realty Trust (FRT) Raise is Due

This month we received a dividend payment of $59.89 (.94 X 63.71) from Federal Realty Investment Trust (FRT) which is the fourth payment in a row of 94 cents per share. If history repeats itself, then our next dividend payment from FRT should come with an increase. Here’s a look at FRT’s historical dividend growth rates:

  • 3-Year – +8.81%
  • 5-Year – +7.04%
  • 10-Year – +5.45%

Since FRT is a REIT, we can’t exactly look at the payout ratio to determine what sort of buffer the Company might have. This is because the IRS requires REITs to pay out at least 90% of their income to shareholders in the form of dividends. What we do know about FRT is that they have increased their dividend every year for 48 years in a row. The sort of financial discipline required to build this track record over time assures us that they can continue this feat going forward. FRT has the longest consecutive record of increasing their dividend in the entire REIT industry. It would be safe to say that with this track record, FRT would be one of the last REITs to stop increasing their dividend in a time of extreme crisis.

We have no idea what to expect for FRT’s coming dividend raise aside from looking at the raises they’ve given in the past 10 years as seen below:

  • 2015 – +8.0%
  • 2014 – +11.5%
  • 2013 – +6.8%
  • 2012 – +5.8%
  • 2011 – +3.0%
  • 2010 – +1.5%
  • 2009 – +1.5%
  • 2008 – +6.6%
  • 2007 – +6.1%
  • 2006 – +3.6%

If we had to guess what the dividend increase might be based on the trends seen above, we’d have to expect an increase somewhere in the range of 2-6%.

With a current yield of just 2.25% which is nearing a 10-year low, we wonder just who is buying FRT given how richly valued they are at the moment.

FRT Yield

We’ve been accumulating our current position in FRT for over 4 years and we’re sitting on gains of about +53%. While we’re happy to see these paper gains, we’d much rather see the price of FRT crash this year and stay that way throughout next year so we can buy the remainder of our position at a cheaper price. Dollar cost averaging provides a huge value add psychologically for investors since regardless of where the market moves, you’re happy. We’re going to be even more happy to see what sort of raise FRT gives us this year and we’re confident this is one position that will be increasing our dividend payments yearly for many years to come.

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