Which High-Yield REIT Stock Is Cheaper, Federal Realty Investment Trust or Realty Income?

Both Federal Realty Investment Trust (NYSE: FRT) and Realty Income (NYSE: O) are among the most popular real estate investment trusts (REITs) on the stock market. Both companies have quality portfolios, are still managing to grow their business, and pay high-yield dividends.

Not all REITs are created equal, though, and for me one of this pair is clearly the better investment on one particular valuation.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Tops on the top line

A REIT is basically a landlord, so the revenue it draws from its properties is central to its operations and its value for investors. If you compare the two on a price-to-sales basis, the edge clearly belongs to Federal Realty. Its price-to-sales ratio is just over 6.6 while Realty Income's is 9.1.

Why the discrepancy? I think Realty Income's high degree of popularity is largely the reason; for many investors, the company is the retail REIT. After all, it has a large and globe-spanning portfolio and appeals to income investors as one of the few stocks that pays its dividends on a monthly basis (as opposed to the standard quarterly disbursement).

Realty Income does, admittedly, have a higher dividend yield than its peer (6.8% vs. 4.6% at the moment). But yield isn't everything. Besides, of the two Federal Realty has by far the more distinguished history. In fact it's one of the market's few Dividend Kings, with a 57-year streak of dividend raises. This is the longest run for a REIT, and it blows past Realty Income's 30.

High-end portfolio

One quite admirable aspect of Federal Realty is that it's very selective about the markets and locations in which it invests; it tends to operate in relatively affluent communities where there is sufficient traffic to support a retail property. Realty Income, on the other hand, is a massive operator that has to juggle a great many facilities and might not necessarily be so discerning.

I like Federal Realty's business strategy, and continue to be impressed by those seemingly endless dividend raises. I also like the fact that it's comparatively quite cheap, so I'd pick it over Realty Income.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $314,847!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $41,848!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $524,186!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Continue »

*Stock Advisor returns as of March 24, 2025

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.