Summary
- Do analysts know something that Federal Realty’s management doesn't?
- Or are they being overly bearish, opening up a wonderful opportunity to buy one of the best REITs of all-time at a rare discount?
- Let's get into the numbers and recent management commentary to find out.
- 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.
It seems almost inconceivable to be asking this question. But lately, investors have been wondering whether Federal Realty Investment Trust's (FRT) dividend is safe.
Is this blue-chip name still worthy of ownership in an income-oriented portfolio?
We last covered the company roughly a month ago in "Federal Realty: The Safest Dividend Is the One That's Just Been Raised.” It highlighted management’s confidence in increasing its dividend, which was very much appreciated.
At the time, it provided much-needed solace for many dividend-growth investors who were worried about the embattled shopping center name. Yet here we are a month later, and analyst estimates for FRT's forward-looking fundamentals continue to deteriorate – at least in regard to adjusted funds from operations (AFFO).
Do these analysts know something management doesn't? Or are they being overly bearish, thereby creating a wonderful opportunity to buy one of the best REITs of all-time at a rare discount?
Let's get into the numbers and recent management commentary to determine the answer one way or the other.
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Painting Federal Realty by the Numbers
The first article we published during the pandemic period was on March 13: A bullish broadcast of Federal Realty’s apparent discount. At the time, FRT was trading for just 16.8x 2020 AFFO expectations – a level very similar to its 2009 bottom – as investors tried to cope with the COVID-19 selloff.
Remember that the shutdowns of “two weeks to stop the spread” were just getting underway. So most people were underestimating the financial impact, including analysts, who still expected positive bottom-line growth.
That was understandable considering how FRT’s shares actually rose during the Great Recession. As was the company’s CFO calling for 2020 funds from operations (FFO) between $6.40 and $6.58, representing mid-single digit growth.
All appeared to be relatively well.
