Summary
- Investors have the chance to buy shares of the only dividend king in REITdom, Federal Realty Investment Trust – at a discount.
- FRT's recent share price weakness has pushed its dividend up above the 5% threshold.
- Patient investors with stomachs strong enough to tolerate short-term issues should strongly consider looking past the short-term threats. This blue-chip REIT is probably worth adding to their portfolios.
- This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »
This article was coproduced with Nicholas Ward.
This week on The Dividend Kings’ podcast, we discussed our recession wish lists – something every investor should have.
For the most part, this consisted of stocks that traditionally trade with high premiums. History has shown that the bluest of the blue chips are the last dominoes to fall when bull markets collapse. So, in many cases, we’re still waiting for worthwhile buying opportunities.
Believe it or not.
Bear markets are scary. We won't deny that. However, they do present tremendous opportunities to buy into some of the world’s very best companies at rare discounts.
The point of the podcast episode was to prepare subscribers for these rare opportunities so that they don’t miss out. Such opportunities can go just as quickly as they appear.
For instance, we've seen the broad markets recover back toward all-time highs since their March lows. And many of the blue-chip names we like so much have recovered as well.
But, as it turns out, one of these rare recession-driven opportunities still does exist. Right now, investors have the chance to buy into the only dividend king in all of REITdom – Federal Realty Investment Trust (FRT) – at a significant discount to both its long-term historical average and iREIT’s fair value estimate.
Valuation Matters
During the DK podcast, I mentioned that I’d been following Federal Realty for years. But I’d never seen a well-valued chance to buy it until the pandemic sent shares everything into a tailspin.
The same was true for Nicholas Ward.
It's been clear for a while NOW that FRT Is one of the very best dividend growth stocks in the real estate investment trust space. The FAST Graph below therefore shouldn’t come as a surprise.
Shares traded with a high premium for nearly all of the last decade.
Source: FAST Graphs
Like the rest of the market, FRT shares sold off significantly during the Great Recession. At the 2009 trough, it traded for slightly less than 13x adjusted funds from operations.
