3 Dividend Aristocrat REITs

3 Dividend Aristocrat REITs

Investors who are considering buying Real Estate Investment Trusts, or REITs, should not only look at the dividend yield as the only reason for purchasing. Many REITs have high yields, but sometimes an extremely high yield can be a sign of deteriorating fundamentals. Income investors should avoid dividend cuts whenever possible.

One way to do this is to focus on stocks with long histories of dividend growth. Even among REITs, there are a select few that have raised their dividends for more than 25 consecutive years. The 3 REITs currently on the Dividend Aristocrats list are below:

  • Essex Property Trust (ESS)
  • Realty Income (O)
  • Federal Realty Investment Trust (FRT)

This article will discuss these 3 Dividend Aristocrats in greater detail, which are amongst the safest REITs too. They are also Dividend Champions.


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3 Dividend Aristocrat REITs

Dividend Aristocrat REIT: Essex Property Trust

Essex Property Trust is a residential REIT that owns multi-family apartment communities located in West Coast markets, primarily California and Washington. It has targeted 8 specific coastal markets in California and Washington. These are cities with large populations and economic growth. Essex has ownership interests in nearly 250 apartment communities consisting of over 60,000 apartment homes.

There remains limited supply in these core markets. This has led to stable results for Essex, even in the current challenging environment. In the 2021 second quarter, Essex’s core FFO-per-diluted share declined 3.8% to $3.04 from $3.16 year-over-year. Same-property gross revenue fell by 3.0% and same-property net operating income fell by 4.2% from Q2 2020. 

Essex’s recovery is gaining strength. Essex also raised its forecast for same-property revenue growth and core FFO-per-share for the full year. Consensus analyst expectations prior to the COVID-19 outbreak were for mid-single digit growth in FFO per share between in the coming years. We conservatively estimate mid-single-digit growth over the next five years from 2021 through 2026.

Dividend Analysis

Essex has increased its dividend for 27 consecutive years. Its strong balance sheet is a big reason for its dividend track record. Essex has just $143 million in total debt maturing through 2023. It has a weighted average interest rate of 3.1%, meaning its interest costs are manageable. And, Essex has very strong credit ratings for a REIT, with BBB+ from Standard & Poor’s and Baa1 from Moody’s.

Real estate has a natural moat and Essex’s exposure to high-value cities with strong technology cultures further widens that moat. However, apartments generally have a more elastic supply than single family homes, which offsets some of that protection. Still, the company has shown the ability to continue raising its dividend through recessions.

Essex stock has a 2.6% dividend yield, which is roughly twice the yield of the broader S&P 500 Index.

Portfolio Insight - Dividend Yield History ESS
Source: Portfolio Insight*

Related Article About Essex Property Trust on Dividend Power

Dividend Aristocrat REIT: Realty Income

Realty Income is perhaps the safest REIT when it comes to dividend sustainability. It has additional appeal for income investors as Realty Income is a monthly dividend stock that makes 12 dividend payments per year instead of the usual four.

Realty Income has a large and diverse property portfolio, consisting of over 6,500 properties leased to roughly 600 different clients, operating across more than 50 different industries. Realty Income operates under the triple net lease structure, meaning the three major sources of operating costs (taxes, maintenance, and insurance) are the responsibility of the tenant. Its long operating history as a net lease REIT has made the stock popular.

This is an advantageous structure for Realty Income, as it provides the company with a strong stream of cash flow which can then be used to acquire additional properties. The snow-ball effect of the business model has provided Realty Income with consistent growth for decades. 

Realty Income has generated solid results in 2021. In the most recent quarter, revenue increased 12% due primarily to new properties and rent increases, while adjusted FFO-per-share increased 2.3%. Rent collection across the entire portfolio was 95.9% for the 2021 second quarter. 

Adjusted FFO-per-share grew by 6% annually between 2009 and 2019. Realty Income generates its growth through growing rents at existing locations, via contracted rent increases or by leasing properties to new tenants at higher rates, but also by acquiring new properties. Management invested about $3.7 billion in new properties during 2019, and another $2.1 billion during 2020.

Dividend Analysis

Realty Income has paid over 600 consecutive monthly dividends to shareholders, a streak that goes back over 50 years. Realty Income has also increased its monthly dividend more than 100 separate times since the company had its initial public offering in 1994.

With credit ratings of A- from Standard & Poor’s and A3 from Moody’s, Realty Income has a healthy balance sheet to protect its dividend. Shares currently yield 4%.

Portfolio Insight - Dividend Yield History O
Source: Portfolio Insight*

Related Articles About Realty Income (O) on Dividend Power

Dividend Aristocrat REIT: Federal Realty Investment Trust

The final Dividend Aristocrat REIT is Federal Realty Investment Trust, which has the longest history of annual dividend increases of any REIT. In fact, FRT recently raised its quarterly dividend to $1.07 per share, marking the 54th consecutive year of dividend increases. FRT is not just a Dividend Aristocrat, it is also a Dividend King.

Federal Realty concentrates in high-income, densely populated coastal markets in the US, allowing it to charge more per square foot than its competition.

In the 2021 second quarter, FFO-per-share nearly doubled compared with the second quarter of 2020 as FRT continues to benefit from the economic reopening. The portfolio was 92.7% leased with 89.6% occupancy. FRT collected 94% of total rents in the second quarter. Along with results, the company raised its FFO-per-share guidance for 2021 and 2022. For 2021, the company expects FFO-per-share in a range of $5.05 to $5.15. 

Dividend Analysis

Such a high level of FFO will cover the annualized dividend payout of $4.28 per share. As REITs are required to distribute at least 90% of their taxable income to shareholders to maintain their REIT status, high payout ratios are common. Shares currently yield 3.5%.

Future growth is likely for FRT as the company continues to make investments. In the second quarter FRT signed 124 comparable leases covering nearly 559,000 square feet for an average rent of $37.34 per square foot. This represented an increase of 8% on a cash rollover basis, signifying that the company can still generate growth from its property investments.

Portfolio Insight - Dividend Yield History FRT
Source: Portfolio Insight*

Related Article About Federal Realty Trust (FRT) on Dividend Power

Disclosure: Members of the Sure Dividend Team are long some of the stocks mentioned.

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Bob Ciura
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Bob Ciura is President of Content at Sure Dividend. Bob has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Prior to joining Sure Dividend, Bob was an independent equity analyst. Bob received a bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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