Summary
- If you're not collecting rent, you're not generating cash flow.
- Without cash flow, it becomes impossible to pay a safe and sustainable dividend.
- We remain bullish, which is why we’ve recently upgraded the stock to a "Speculative Strong Buy."
- 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 and excerpts were originally published on Nov. 8, 2020 on our Marketplace service.
- If we can say nothing else about 2020, it’s this: It’s given us new perspective on properties we thought we knew well.
Take Federal Realty Investment Trust (FRT). Last year, I wrote about it about 20 times, sometimes alone. Sometimes in “listicles.”
This January, I wrote about it again (listicle-style) in “Retirement Strategies: REITs to the Rescue.” At the time, we knew about COVID-19, but we had no idea it would wreak such devastation on the US.
Fast-forward to Oct. 6, and we’re very, very aware, of course. That’s why we published “Could Federal Realty Be Dethroned as Dividend King?”
What once would have been unthinkable had to be considered: A company known for steadily paying and raising its dividend for more than 50 years could fail to do so.
Knowing some investors were worried, we highlighted the evolution – or devolution – of Federal Realty’s fundamental performance and outlook.
Our ultimate conclusion was that this blue-chip stock was a Speculative Buy.
(Incidentally, “blue chip” is too loosely used in equity analysis these days. That’s why I made a serious effort to define it last week.)
(Source)
FRT has struggled mightily under the shutdowns, it’s true. But, again, we're talking about a stock with a 53-year consecutive dividend increase streak. It manages a best-in-breed property portfolio in the shopping center space. And it maintains an A-rated balance sheet.
(Source: FRT Q3 ER Presentation, slide 2)
In short, if this isn't a blue-chip stock, we're not sure what is.
Oh yeah, and yesterday, even as we were getting ready to publish this article, the markets pushed it up more than 30%.
Talk about a change of heart!
