Dividends Don't Lie: This Is the Most Reliable High-Yield REIT

There's a saying in some dividend investing circles that the safest dividend is the one that's just been increased. That's not always true, but dividend increases are an important signaling tool for companies. Steadily increasing dividends signal that a company is confident in its future. In the real estate investment trust (REIT) sector, there is no company more confident than Federal Realty (NYSE: FRT). Here's why.

Federal Realty is the "king" of REITs

Federal Realty is not the largest REIT by any stretch of the imagination, as it owns only around 100 strip malls and mixed-use properties. But there is one metric on which the company outshines all other REITs. It has increased its dividend annually for 58 consecutive years.

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Those 58 annual dividend increases put Federal Realty on the list of Dividend Kings. It is the only REIT on that list, with Federal Realty's dividend streak longer than any other in the REIT sector. If you are looking for a reliable dividend stock, this REIT and its 4.2% yield should be on your short list.

How did Federal Realty build its dividend record?

What's interesting about Federal Realty is that its impressive record is built on a business model that deviates materially from most of its REIT competitors. As noted, Federal Realty has a very small portfolio. While other REITs focus on growth through acquisitions, Federal Realty focuses on quality over quantity.

To that end, the REIT's portfolio has both higher average incomes and higher population densities around its properties than those of its closest peers. Essentially, it owns properties where retailers want to be located. But that's only half the story.

Federal Realty is also a very active portfolio manager. That has two meanings here. For starters, it invests substantial time and money in its properties, with redevelopment one of the REIT's core competencies. It effectively ensures that its properties remain top destinations for consumers and retailers alike.

But management is also happy to sell assets that have reached their full potential, using the proceeds to buy properties that it can invest in to increase their value. It is this dual approach that allows Federal Realty to maintain a small portfolio while steadily growing its dividend.

Federal Realty is the most reliable high-yield REIT

If you are using your dividends to supplement Social Security in retirement, Federal Realty should be on your wish list, if it isn't already in your portfolio. It has a proven dividend track record that puts it at the top of the REIT sector and on the Dividend King list. Add in the 4.2% yield, and even the most conservative investors should have a hard time passing this high-yield REIT by.

Reuben Gregg Brewer has positions in Federal Realty Investment Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.