We recently published a list of The 10 best dividend aristocrats with over 3% returns. In this article, we take a look at how Federal Realty Investment Trust (NYSE:FRT) compares to other dividend stocks yielding over 3%.
When it comes to investing in stocks, high-growth companies often take the spotlight. However, in uncertain times, dividend stocks—companies that pay regular quarterly dividends to shareholders—can serve as a safe investment and help build wealth regardless of market conditions. Historically, dividends have played a significant role in stock market gains. Since 1930, dividends have contributed about 40% of the S&P 500’s total return. When it comes to dividend stocks, companies that consistently increase their dividends are especially important to investors. These companies provide shareholders with a steadily growing income.
A popular dividend strategy for investing in high-dividend stocks is Dividend Aristocrats, companies that have increased their payouts for 25 consecutive years. Although the Dividend Aristocrat Index has lagged this year, returning just over 5% year-to-date, it has performed well over the long term, especially during market downturns. Phillip Brzenk, global head of multi-asset indexes at S&P, studied the performance of dividend growth strategies, focusing on times when the market was performing negatively. He discovered that since the end of 1989, there were six years in which the broader market posted negative returns. In each of those years, the Dividend Aristocrat Index outperformed the benchmark by an average of 13.28%. Notably, in three of those years, the Dividend Aristocrats even delivered a positive total return.
Given the strong returns of dividend growth stocks, numerous companies are looking to increase their dividends. There were 539 dividend increases in the second quarter of 2024, a 17.2% increase from the 460 increases in the same quarter of 2023. Total dividend increases for the quarter were $20.4 billion, well above the $9.8 billion in the second quarter of 2023, according to a report from S&P Dow Jones Indices. These dividend increases are not just a quick fix to attract investors; they are supported by strong corporate balance sheets and increased cash flows. According to Janus Henderson, corporate cash flow remained solid in most sectors in 2023, providing ample funds for dividends and share buybacks. Consequently, global dividend growth increased 5% for the year, following the long-term trend. The company also gave an optimistic outlook for dividends in 2024, forecasting dividends of $1.72 trillion for the year. This would represent an increase of 3.9% on a total basis and a growth rate of 5%.
Dividend Aristocrat stocks are known for their increasing yields, but that doesn’t mean they don’t produce solid returns. Many Dividend Aristocrats offer above-average yields and decades of steady dividend growth. This combination is particularly beneficial for income investors because it offers the best of both worlds: robust yields and steady growth. Now let’s take a look at some of the best Dividend Aristocrat stocks yielding over 3%.
Our methodology:
For this list, we looked at a group of 67 Dividend Aristocratic companies known for increasing their dividends for 25 years or more. From this list, we selected 10 stocks with dividend yields above 3% (as of July 17) and ranked them in order from lowest to highest yield. We also mentioned the hedge fund sentiment for each stock, which was pulled from Insider Monkey’s database of 920 funds (as of Q1 2024).
Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (More details can be found here).
A wide-angle view of an urban skyline depicting the company’s investments in neighborhoods.
Federal Realty Investment Trust (NYSE:FRT)
Dividend yield as of July 17: 3.97%
Federal Realty Investment Trust (NYSE:FRT) ranks eighth on our list of the best Dividend Aristocrat stocks. The Maryland-based real estate investment firm invests in shopping malls and other entertainment properties. In the first quarter of 2024, the company reported rental income of over $291 million, up from $273 million in the same period last year. It got off to a strong start in 2024, reaching its highest first-quarter rental volume ever by leasing over 566,000 square feet of comparable retail space. In addition, it secured leases for approximately 190,000 square feet of office space at its prime mixed-use locations during the quarter. This strong demand underscores the company’s leadership in the mall industry.
Although Federal Realty Investment Trust (NYSE:FRT) operates as a typical REIT, its business approach sets it apart from its peers. Unlike rivals that aim to amass huge real estate portfolios, the company focuses on quality over quantity. As of the end of March 2024, it owned only 102 properties, but they are highly sought after. The company strategically acquires properties in and around large metropolitan areas with high population density and high income levels. This strategy has several advantages, for example, during the pandemic, when many properties struggled with occupancy, FRT was able to attract tenants looking to move from nearby locations to secure space in its properties.
Federal Realty Investment Trust (NYSE:FRT) has consistently increased its dividends for the past 56 years in a row. During that time, it increased its payouts at a compound annual growth rate (CAGR) of 7%. It currently pays a quarterly dividend of $1.09 per share. With a dividend yield of 3.97% as of July 17, FRT is one of the best Dividend Aristocrat stocks on our list.
Insider Monkey’s database for the first quarter of 2024 shows that 22 hedge funds held shares in Federal Realty Investment Trust (NYSE:FRT) with a total value of over $244 million.
Total FRT takes 8th place on our list of the best Dividend Aristocrats to buy. You can visit The 10 best dividend aristocrats with over 3% returns to see the other Dividend Aristocrats that are on hedge funds’ radar. While we recognize FRT’s potential as an investment, we believe some highly undervalued dividend stocks promise higher returns and do so in a shorter time frame. If you’re looking for a highly undervalued dividend stock that has more promise than FRT but trades at less than 7 times earnings and yields nearly 10%, read our report on the dirt cheap dividend stock.
READ MORE: Analyst sees a new $25 billion ‘opportunity’ for NVIDIA and the 10 best stocks to buy in Q3 2024, according to Bank of America.
Disclosure: None. This article was originally published on Insider Monkey.
