REIT Week Edition: My Top 10 Dividend Growers
- Dependable dividends are a big reason why investors buy stocks.
- In this article, we’re not as interested in the track record of dividend increases.
- But rather, the scale of those increases, as measured during the most recent three-year period.
I’m on the road (again) – this time in New York City, interviewing CEOs and shaking lots of hands at the preeminent commercial real estate investor conference, REITweek, hosted by the industry’s association NAREIT. Amidst the continental power breakfasts and lunch spreads, I thought I’d quickly serve up what’s cooking among the most prominent dividend growers in the Real Estate “kitchen.”
One of the recipes for getting rich is: stick with stocks with above-average appreciation potential, and safe & growing dividends. It’s no secret – there are two ways of getting paid when you invest: with capital gains and dividends. And history shows these are correlated, with capital gains influenced significantly by dividends. Dependable dividends are a big reason why investors buy stocks.
In The Ultimate Dividend Playbook, Josh Peters explains, “…dividends speak louder than earnings. A company’s pattern of dividend payments – its dividend record – can offer valuable clues to underlying corporate performance…Dividends are more than mere information; they provide insight that any investor can use to make successful investments.”
And Real Estate Investment Trusts (or REITs) are unique to ordinary stocks as they own actual real estate and must pay at least 90% of their taxable income as dividends. This gives investors an appealing risk/reward model that paying the higher dividends enjoyed by many retirees and fixed income investors.
The best part is that the growth of REIT dividends is much easier to predict than that of ordinary stocks since REITs generate their income from their tenants, with most REITs utilizing lease agreements that offer a greater degree of certainty for FFO earnings (Funds from Operations) that the REIT will generate.
And while it’s harder to forecast shorter duration leases (i.e. hotels), REITs generally offer a more systematic approach for dividend growth. As Josh Peters explains, “Dividend increases – even more than current earnings or earnings projections – are a forward-looking indicator of growth and total return prospects.”
In this article, we’re not as interested in the track record of dividend increases – that is, the number of consecutive years of increases (Federal Realty’s (NYSE:FRT) 50-year record is unmatched in the REIT universe), but rather, the scale of those increases, as measured during the most recent three-year period.