This Elite Financial King Could See Payout Growth Hit 7% By 2028

Federal Realty (NYSE: FRT) is actually fairly small real estate investment trust (REIT) compared to its competitors, with a portfolio of only about 100 or so properties. Even so, this strip mall and mixed-use property owner has long focused on quality over quantity. That's allowed it to build an enviable dividend track record, with its 58 consecutive annual dividend increases, which makes it a Dividend King. That is, by far, the longest streak in the REIT sector.

Here's why this high-yield stock could become increasingly attractive to dividend investors over the next couple of years.

What does Federal Realty do?

As noted, Federal Realty owns strip malls, which are a relatively unexciting asset class, and mixed-use developments, which are somewhat more interesting but still not particularly exciting. There are several key factors that distinguish Federal Realty from its REIT peers. First off, it has a very concentrated portfolio. While many of its competitors lean on acquisitions for growth, Federal Realty takes a different approach.

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From a big-picture perspective, Federal Realty focuses on quality over quantity. That has left it with higher average population density around its properties and higher average incomes than its peer group. This basically means that the REIT's properties are in high demand among retailers and, in turn, consumers like to shop at them.

However, that's just the big picture; there are many moving parts here. For example, Federal Realty invests a significant amount of effort in development and redevelopment. Its shopping centers tend to be leaders in the areas they serve because Federal Realty makes the necessary capital investments to keep them in top shape.

However, Federal Realty is also an active portfolio manager, meaning it frequently buys and sells properties. Management is more than happy to sell an asset if it believes the property has reached its full potential and there's a good offer on the table. That cash is then used to buy a new property that can benefit from a little of the love that Federal Realty is so experienced in giving. The process repeats itself, allowing the REIT to build value for its shareholders over time.

Good times and bad times are normal

Now it is time to go back to the incredible dividend streak Federal Realty has racked up. You can't operate for 58 years without having to work through both good times and bad times. As is normal with every single Dividend King, Federal Realty's dividend tends to grow more slowly in bad times and more quickly in good times.

During and after the COVID-19 pandemic, between 2020 and 2024, Federal Realty had been offering a token dividend increase of just a penny per share once per year (amounting to a $0.04 hike when annualized). That's not surprising, given that the pandemic period included the shutdown of non-essential businesses. That included a very large number of retailers located within a strip mall. That changed in 2025, when the increase was upped to $0.03 per share or $0.12 on an annualized basis.

FRT Dividend data by YCharts

That pushed the increase rate from less than 1% to just shy of 3%. However, if you go back a few years to 2013 to 2016, the rates of increase were much higher, between 6% and 11%. Essentially, the REIT made up for slower dividend growth during the Great Recession between 2007 and 2009 with higher bumps during better times.

With occupancy at 93.8%, still below the 20-year average of 95.4%, there is room for further business improvement. Meanwhile, management just raised its projection for full-year funds from operations (FFO) -- a key metric gauging REIT performance -- so that the midpoint represents 4.6% FFO growth. That suggests that performance is improving, with management talking up the pipeline of development and redevelopment projects it has lined up to keep the good news flowing. It looks increasingly as if Federal Realty's business is on the upswing after a period of weakness.

Watch Federal Realty's dividend growth rate

All in all, it would be no surprise if Federal Realty's business experienced a few years of robust growth. After all, the foundation for just that appears to have been laid down following the COVID-19 pandemic. And, if that's the case, the recently increased dividend growth rate to 3% could be just the start.

A 7% dividend growth by 2028 is an educated guess, but one that history suggests could be on the conservative side. Now may be an attractive time to buy Federal Realty, as it offers a 4.6% dividend yield, which is higher than the average REIT yield of 3.9%.

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.