History says this 3.9% yielding stock will pay you a bigger dividend next year, even if there’s a recession

There are only a few dozen stocks that have increased their dividends for more than 50 consecutive years, and only one real estate investment trust is a member of this exclusive club. Shopping center developer and manager Federal Realty Investment Trust (FRT 1.77%) has by far the longest streak of dividend increases in its sector and one of the most impressive in the entire stock market.

With that in mind, here’s what Federal Realty Investment Trust is doing and why the stock might be worth a closer look right now.

What does Federal Realty Investment Trust do?

As the name suggests, this is a real estate investment trust, or REIT. It has been around since the early 1960s and is one of the oldest REITs in the United States. Specifically, Federal Realty owns a portfolio of 102 commercial properties located in some of the most populous and high-income metropolitan markets in the US.

Most properties in the portfolio have some sort of food component and many have non-retail elements such as residential, office or hotel space. Thirty-eight percent of the portfolio can be classified as mixed-use centers. More than three-quarters of the rental income comes from retail tenants, but with more than 3,000 residential housing units at the properties, there is a significant multifamily component.

For this REIT, there are approximately 3,300 different tenants occupying 26 million square feet of space, and none of them represent more than 3% of the rent. Retail and office tenants generally sign long-term leases (10-year terms are standard) with annual rent increases included.

Federal Realty grows in several ways, including developing new properties from the ground up, redeveloping existing properties, and by strategically selling assets to redeploy capital elsewhere. The company currently has approximately $400 million in mixed-use projects under construction and has $330 million in redevelopment projects.

An unmatched dividend record

Federal Realty Investment Trust has the longest active streak of consecutive annual dividend increases in the real estate sector. It has increased its payments for an impressive 57 consecutive years, dating back to 1967. And it’s not just an impressive streak of increases — the magnitude of the increases is impressive. Federal Realty has grown its dividend at an annualized rate of 7% over the 57-year period. In fact, the current dividend is 37 times higher than the company’s payment when the streak began.

If you’re looking for a reliable income, here’s a must-know statistic. Since Federal Realty’s dividend growth streak began, there have been eight recessions in the United States. This includes the Great Recession of 2007 to 2009, which was directly related to real estate. But the company’s consistent revenue model has kept profits growing and management has kept the streak alive.

It’s also worth noting that Federal Realty isn’t just an income stock. It has significant positive potential. The past few years haven’t been a great environment for REIT stocks, but long-term performance has been impressive. Federal Realty has generated a total return of 1,590% since 2000, about triple the S&P 500.

Is it right for you?

To be clear, Federal Realty is not a get-rich-quick stock. It is designed for slow and steady blending over time. With the stock trading for a reasonable valuation and potential tailwinds from expected interest rate cuts generally good for REIT prices, now could be a smart time for income investors to take a look.