Dividend Aristocrat Federal Realty’s Share Price Reverses Three-Year Loss into Double-Digit-Percentage One-Year Total Return (FRT)
By: Ned Piplovic,
While maintaining its dividend aristocrat designation with continued annual dividend hikes, the Federal Realty Investment Trust (NYSE:FRT) reversed a 35% share price drop over an 18-month period to combine with the trust’s dividend distributions for a double-digit-percentage total return over the past 12 months.
Despite the pullback in 2017 and the first half of 2018, the share price performed well over the past decade. Other than this 18-month-long decline, the share price advanced with minimal volatility over the past 10 years and rose more than three-fold since hitting its 15-year low in the aftermath of the 2008 financial crisis.
In addition to robust asset appreciation over an extended time horizon, Federal Realty also has hiked its annual dividend distribution for the past 51 consecutive years. Since the onset of this dividend hikes streak in 1967, the trust has advanced its total annual payout 34-fold. Over a span of more than five decades, Federal Realty managed to maintain an average dividend growth rate of 7.2% per year.
This record of 51 consecutive annual dividend hikes is currently the longest streak in the Real Estate Investment Trust (REIT) industry. With such a long record of annual dividend hikes and sufficient market capitalization, Federal Realty has achieved Dividend Aristocrat status when the REIT became a component of the S&P 500 Index in 2016. The Dividend Aristocrat designation currently applies to just 11.4% of S&P 500 companies. To achieve the Dividend Aristocrat status, an S&P 500 company must meet a $3 billion market capitalization minimum and have a current streak of at least 25 consecutive annual dividend hikes. With its current 51-year streak, Federal Realty joined an even more exclusive group of just 13 Dividend Kings. These are Dividend Aristocrat companies that boosted their annual dividends at least the last 50 consecutive years.
Federal Realty Investment Trust (NYSE:FRT)
Headquartered in Rockville, Maryland, and founded in 1962, the Federal Realty Investment trust has been operating as an REIT since 1999. The trust owns, operates and redevelops high-quality retail based properties located primarily in major coastal markets from Washington, D.C., to Boston as well as San Francisco and Los Angeles. The trust focuses its expertise on creating urban, mixed-use neighborhoods like Santana Row in San Jose, California, Pike & Rose in North Bethesda, Maryland, and Assembly Row in Somerville, Massachusetts. These unique and vibrant environments that combine shopping, dining, living and working provide a destination experience valued by their respective communities. As of May 2019, the Federal Realty Investment Trust owned and operated 105 properties in 12 states and the District of Columbia. These properties have a combined leasable space of more than 24 million square feet, spread across approximately 3,000 commercial tenants and more than 2,600 residential units. The REIT earned its Dividend Aristocrat label when the trust became a component of the S&P 500 Index in 2016. The inclusion in the S&P 500 index was the last requirement that the trust needed to become a Dividend Aristocrat, as the REIT already met the market capitalization and consecutive annual dividend hikes requirements prior to that. In fact, the trust had a streak of 49 annual dividend hikes when it earned the Dividend Aristocrat designation in 2016 and became a Dividend King with its 50th consecutive dividend boost the flowing year.
The company’s current $1.02 quarterly payout is 2% higher than the $1 dividend payout from the same period last year. This higher quarterly dividend corresponds to a $4.08 annualized payout amount and a 3.1% forward dividend yield. This current yield is 5.6% above the trust’s own 2.91% average dividend yield over the past five years as well as slightly above the 1.04% simple average of the entire Financial sector.
While the trust enhanced its annual dividend payout enormously over the past five decades, the growth rate declined as the payout amounts increased. Over the past two decades, the fund’s total annual dividend distribution amount rose nearly 130%. That pace of advancement is equivalent to an average annual growth rate of 4.2%. However, the growth rate increased over the past five years as annual dividends advanced at a growth rate of 5.8%.
After losing more than 35% of its value during the 18-month decline, the share price has been rising since February 2018. Riding that uptrend, the share price rose more than 17% during the first half of the trailing 12-month period. However, the overall market correction in December 2018, interrupted the uptrend and the share price declined to its 52-week low of $115.33 on December 24, 2018. This low was more than 16% below the price level from the beginning of the trailing 12 months.
However, after the overall markets lessened the downward pressure in late December 2018, the share price recovered all its losses by the first week of February 2019. After recovering its most recent losses, the share price continued to advance until it reached it new all-time high of $138.92 on April 5, 2019. This all-time high marked a gain of more than 20% above the 52-week low in just four months.
After peaking in early April, the share price retreated 4.5% and closed on June 5, 2019, at $132.73. This closing price was more than 11% higher than one year earlier and 15.1% above the 52-week low from late December 2018. Because of the decline in 2017 and the first half of 2018, the June 5 closing price was only 10% higher than it was five years ago.
The dividend advancement over the past three years was unable to overcome the share price drop and delivered to the shareholders an 8.4% total loss for the trailing three-year period. However, the 11% one-year price gain combined with the dividend income yielding more than 3% for a total return on shareholders’ investment of 14.5% over the last year. Over the last five years, the trust delivered a total return of more than 23%.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.