Buying high-quality dividend stocks is a great way to collect passive dividend income. The best ones increase their dividends each year, and they can help you more than offset the impact of inflation over the long run.
Federal Realty Investment Trust (NYSE: FRT) , NNN REIT (NYSE: NNN) , and Essex Property Trust (NYSE: ESS) have elite records of growing their dividends. The real estate investment trusts ( REITs ) have all delivered 30 or more years of consecutive annual dividend growth and should be able to continue increasing their higher-yielding payouts in the decades ahead, making them great stocks to buy for dividend income that could steadily rise throughout your lifetime.
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Dividend royalty
In August 2024, Federal Realty Investment Trust increased its dividend for the first time since then, continuing its track record to 57 successive years of raising dividends. This makes their streak the longest within the REIT industry, thus qualifying Federal Realty as a Dividend King , a business entity with 50 or more employees years of annual dividend increases. The retail REIT currently has a dividend yield of 4.5%, well above the S&P 500 's 1.3% yield.
One major factor behind Federal Realty’s capacity to continually boost its dividend is its emphasis on quality rather than sheer volume. This corporation manages 102 open-air shopping complexes and mixed-use developments encompassing 27 million square feet of retail space along with 3,100 residential units. A significantly more compact collection compared to the industry frontrunner. It specifically concentrates on acquiring assets in the innermost suburban rings surrounding large metropolitan areas due to their high concentration of extremely wealthy customers.
Federal Realty regularly allocates funds for enhancing its property portfolio. This includes finishing renovation initiatives at current locations to draw better-quality renters or incorporate residential spaces. Additionally, they plan to dispose of less desirable assets. recycle that capital This emphasis on excellence has allowed Federal Realty to produce more consistent rental income that has progressively increased over time, even against the challenges faced by numerous retailers.
Hitting another dividend milestone
NNN Last year, REIT announced its 35th successive yearly hike in dividends. Fewer than eighty publicly listed firms, along with just two additional REITs, have achieved this feat. The company’s dividend currently offers a yield of 5.5%.
NNN REIT similarly concentrates on acquiring retail properties. Nonetheless, it deals with a distinct category of assets: single-tenant buildings. net lease buildings. Net leases supply consistent rental revenue since the occupant manages all operational costs associated with the property, such as regular upkeep, property taxes, and structure insurance. This steady stream of rent ensures a reliable foundation for dividend payments.
The firm maintains a comparatively modest dividend payout ratio as a REIT, below 70% of its fundamental earnings. funds from operations this year. That enables it to retain meaningful free cash flow to fund new income-generating retail property investments, to the tune of about $200 million this year. It typically acquires properties from existing retail tenants in sale-leaseback transactions That approach furnishes those retail companies with funds to keep growing their presence, thereby generating potential buyout prospects in the future. NNN REIT.
Focused on the West Coast
Essex Properties Trust recently increased its dividend, extending its streak to 31 straight years. The residential REIT has raised its payout by a cumulative 516% since its initial public offering in 1994. The landlord's dividend payment currently yields 3.4%.
The company focuses on owning apartment communities in coastal markets along the West Coast. These markets benefit from strong and growing demand for rental housing. Meanwhile, the long and complex entitlement process to build new homes tends to constrain supplies. These factors keep occupancy levels high and drive above-average rental growth rates.
Essex Properties enhances its growth rate by acquiring new apartment communities and funding development projects. It will also invest in structured financings such as preferred equity and mortgage debt secured by multifamily communities in its core markets to generate additional income. These investments add to its growing rental income, enabling it to continue raising the dividen d.
Durable dividend growth stocks
Federal Realty, Essex Property, and NNN REIT have increased their dividends each year for more than three decades. Their focus on a specific property type or market is a key contributor to their success, and their expertise and conservative approach have enabled them to continue growing through a variety of market conditions. As long as they don't deviate from their winning strategies, these REITs should be able to continue supplying investors with a growing stream of passive income in the decades ahead.
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Matt DiLallo The Motley Fool does not hold any shares in the stocks discussed. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .