Buy Better: Real Estate Income or Federal Real Estate Trust

Federal Real Estate Trust (NYSE: FRT) and Real estate income (NYSE:O) are two of the leading real estate investment trusts (REITs) known for their reliable dividend payouts. After pandemic-related challenges rocked the real estate industry, both companies made a strong comeback, outperforming S&P500 over the past year. If you’re trying to choose between these two dividend aristocrats, here’s a look at how they compare and what’s the best buy today.


Market capitalization

Debt to EBITDA

Price at FFO

Dividend yield

The payout ratio

Federal Real Estate Trust

$9.2 billion





Real estate income

$39.4 billion





Federal Real Estate Trust

Federal Realty Trust is one of the oldest publicly traded REITs. Founded in 1962, it has a long track record of adding value for its shareholders by increasing dividends for 54 consecutive years. Its main investment niche is retail, but in reality, Federal Realty Trust is turning into a diversified REIT thanks to the growing number of mixed-use properties in its portfolio. In addition to retail, offices and hotels, the Company owns and leases approximately 3,400 residential units, with 22% of its annual base rents coming from residential and office space combined.

The company is hyper-focused on its asset locations, owning mixed-use centers and outdoor malls in prime suburban markets in nine of the most populous metropolitan areas: Silicon Valley; Southern California; Phoenix; Miami; Washington D.C.; Philadelphia Cream; New York; Boston; and Chicago. Although its performance is not quite up to pre-pandemic levels, the company is seeing positive and noticeable improvement year on year.

In 2021, funds from operations (FFO), an important metric used to gauge a REIT’s profitability, increased 27% and net operating income (NOI) increased 101%. The company leased 2.2 million square feet of rental space for approximately $2.48 more per square foot than the prior year and the occupancy rate is 91.1% for its entire wallet.

Residential housing is seeing record demand, which is certainly helping the company recover at a much faster pace than some of its competitors. Currently, it has six ongoing redevelopment projects and several future projects to be completed in 2022 and beyond, two of which include residential elements.

Real estate income

Realty Income is also one of the oldest REITs, established in 1969 and going public in 1994. Like Federal Realty Trust, the company is primarily a retail REIT, but recent acquisitions make it a more diversified contract-focused REIT. sale-leaseback and long-term net rental commercial real estate. Instead of paying quarterly dividends like Federal Realty Trust, Realty Income pays monthly dividends, with a track record of 114 dividend increases since its IPO.

In 2021, the company spent $6.1 billion to nearly double the number of properties in its portfolio, adding things like industrial real estate to its retail portfolio, which serves 60 diverse commerce industries. Retail. Today, it has 11,136 properties in 50 states, Puerto Rico, the United Kingdom and Spain, totaling 210 million square feet of rental space. For comparison, Federal Realty Trust has 104 properties with 25 million square feet.

The company continues to expand through acquisitions and recently announced the sale-leaseback purchase of the Encore Boston Harbor Casino and Resort for $1.7 billion, which has a long-term net lease with Wynn Resorts. The deal is expected to close in late 2022. While this is a huge pivot for the company, bolstering its position as a diversified REIT, it could improve its long-term portfolio performance.

Walgreens, General dollar7 eleven, fedex, dollar tree, and Family Dollar are Realty Income’s top five tenants by annual base rent (ABR), but its massive portfolio is leased to many Fortune 500 companies. The portfolio’s occupancy rate is incredibly high at 98.5 %, with 99.5% of the total rents in its portfolio being received by the end of the year. Clearly, the company has not only rebounded, but exceeded pre-pandemic levels, with revenue, FFO and net operating income up across the board.

Image source: Getty Images.

What’s the best buy?

While long-term demand for in-store purchases declines thanks to the rise of e-commerce, retail is far from dead. Both companies are finding ways to pivot and adapt their existing retail portfolios to meet changing demand while diversifying revenue to achieve growth. It really depends on which pivot you think will lead to the biggest gain. Both REITs are clear long-term winners and solid buys at today’s discounted prices.

FRT Total Return Level Table

FRT total return level data by YCharts.

Realty Income has provided the best return to investors over the past 10 years and today offers a slightly higher dividend yield to investors, but is slightly higher in value than Federal Realty Trust. And investors should always remember that past results don’t always guarantee future results. Being so large could make future growth difficult for Realty Income. Federal Realty Trust certainly has more room for growth, but Realty Income’s current portfolio performance and diversification make it the winner in my book.

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Liz Brumer-Smith has no position in the stocks mentioned. The Motley Fool owns and recommends FedEx. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.