Federal Realty: The Last Dividend King in the REIT World—and Why It’s Worth Buying Now

Federal Realty Investment Trust (NYSE: FRT) holds a unique distinction in the investment world: it’s the only REIT to qualify as a Dividend King, a title reserved for companies with 50+ consecutive years of dividend increases. With a 56-year streak, FRT’s resilience is unmatched in its sector. Yet, despite this pedigree, the stock is trading at a valuation discount as of April 2025. Here’s why now could be the right time to consider this dividend stalwart.

The Dividend King’s Playbook

Federal Realty’s dividend track record is a testament to its conservative strategy and focus on high-quality real estate. The company specializes in coastal U.S. markets—think Silicon Valley, New York, and Washington, D.C.—where demand for retail and mixed-use spaces remains robust. Its portfolio emphasizes grocery-anchored shopping centers, which drive consistent foot traffic, and it’s diversified across retail, apartments, and office properties.

This strategy has kept FRT’s dividend streak alive for over half a century. In 2024, it increased its payout for the 56th consecutive year, maintaining a dividend yield of 4.77%—far above the S&P 500’s average.

Why It’s “On Sale” Again

The key to FRT’s current undervaluation lies in its P/FFO ratio, a critical metric for REITs. As of April 2025:
- P/FFO = 13.45, calculated using its share price of $92.29 and trailing-twelve-month FFO per share of $6.86.
- This ratio is below the sector average of 16x for Q1 2025, suggesting FRT is trading at a discount relative to its peers.

What’s Driving the Discount?
- Interest Rate Concerns: REITs often trade inversely to bond yields. While rates have stabilized, lingering fears about rising costs may have pressured valuations.
- Sector-Wide Sentiment: REITs as a whole have underperformed the S&P 500 in recent years, with the sector’s P/FFO ratio still 30% lower than its 2007 peak.

However, FRT’s fundamentals argue against this pessimism.

The Case for Buying Now

1. Strong Operational Performance

• FFO Growth: FFO per share rose 3.3% in 2024 to $6.77, driven by record leasing (452 leases, 2.4M sq ft) and occupancy rates hitting 94.1%—up 190 basis points year-over-year.
• Rental Growth: Leased rates increased 4.2% quarterly, with a 11% cash basis rollover (the premium charged to renewing tenants).

2. Analyst Optimism

• Price Target: Analysts project a $117.46 average price target, implying a 27% upside from April 2025 levels.
• Consensus: A “Buy” rating dominates, with firms citing FRT’s defensive portfolio and dividend safety.

3. Valuation Metrics Support a Bargain

• FFO Yield: At 7.4%, FRT’s FFO yield (calculated as FFO/share ÷ price) is double its dividend yield, signaling undervaluation.
• Dividend Safety: While the payout ratio is 128.65% (dividends exceed net income), FRT’s FFO covers dividends comfortably.

4. Balance Sheet Strength

• Debt/Equity: A moderate 1.33x, well within REIT norms.
• Liquidity: $128.6M in cash and access to credit lines provide flexibility for redevelopment projects (e.g., Hoboken, NJ, and Philadelphia, PA).

Risks to Consider

• Payout Ratio: The dividend’s reliance on FFO (not GAAP earnings) could strain cash flow if occupancy or rental rates falter.
• Sector-Specific Risks: Retail REITs face headwinds from e-commerce and shifting consumer preferences, though FRT’s grocery-anchored model mitigates this risk.
• Interest Rates: Higher borrowing costs could pressure REIT valuations, though the Fed’s pause on hikes has eased this concern.

Conclusion: A Rare Opportunity in a Dividend Icon

Federal Realty’s 56-year dividend streak, operational resilience, and undervalued P/FFO ratio make it a compelling buy at current levels. With analysts forecasting a 27% upside and FFO growth poised to outpace the sector, FRT appears primed to continue its Dividend King legacy.

Crucial data points to remember:
- P/FFO of 13.45 vs. sector average of 16x: A clear valuation discount.
- 7.4% FFO yield: A high return relative to its price.
- Record leasing and occupancy: Proof of demand in its core markets.

While risks like the payout ratio and sector volatility exist, FRT’s fortress-like portfolio and disciplined management suggest these are manageable. For income investors, this Dividend King is a rare find—one that’s undervalued and ready to deliver.

In a market where patience pays, FRT’s combination of safety, income, and upside makes it a top pick for long-term portfolios.