It has raised its dividend every year since 1967. Why is the market dumping it now?
The only real estate fund in the world with Dividend King status has raised its payout for the 59th consecutive time this year. Yet the stock is down 14% from its peak, and government bond yields not seen in a quarter-century are scaring off buyers. What are you paying that premium for?
Key points
The only real estate fund with Dividend King status raised its payout for the 59th consecutive time, yet its stock is down 14% from its high.
The U.S. 10-year Treasury yield jumped to 5.27%, its highest in a quarter-century, drawing buyers away from its 4.1% dividend.
A 91% payout ratio looks like a warning sign, but for real estate funds that figure measures something entirely different.
Analyst consensus puts its target 17% above the market, while Bulios's fair value model says the opposite.
Just as money became the most expensive in a generation, the fund spent $508 million outside its tried-and-true playbook.
The company that has raised its dividend longer than the internet has existed
Federal Realty Investment Trust $FRT has been doing one of the most boring things you can find on the stock market since 1962. It owns open-air shopping centers in affluent suburbs along the U.S. coasts—around Washington, Boston, Philadelphia, in Silicon Valley and Los Angeles—and leases space to supermarkets, pharmacies, restaurants, and fitness centers. No artificial intelligence, no chips. Just 103 properties, roughly 3,700 tenants, and flagship destinations like Santana Row in San Jose or Assembly Row near Boston, where people live, shop, and work in one place.
That boredom has produced a streak unmatched by any other real estate fund in the world. In July, the fund raised its quarterly dividend by 3% to $1.16, or $4.64 a year, marking its 59th consecutive increase. It raised its dividend through the Moon landing, oil shocks, the dot-com bust, the financial crisis, COVID, when half its tenants were closed, and the high-cost-of-money years after 2022. Among so-called Dividend Kings—companies with more than half a century of consecutive increases—it is the only real estate fund.
Even so, ordinary investors barely talk about it. Since Amazon's rise, “brick-and-mortar stores” have been written off in the media, and boring doesn't sell. But for the income portion of a portfolio, this kind of boredom is the most valuable thing you can buy.
And this year, you can buy it with a question mark.