3 Dividend Growth Stocks to Buy Hand Over Fist in

Dividend investing isn’t a one-size-fits-all pursuit. Some people like high yields, while others prefer to err on the side of dividends that grow over time. If you fall into the latter camp, you’ll want to take a look at Agree Realty (NYSE: ADC), Federal Realty (NYSE: FRT), and T. Rowe Price (NASDAQ: TROW) as June unfolds. Here’s why.

Agree Realty isn’t the biggest, but it’s attractive

When most investors think about a net lease real estate investment trust (REIT), the first name to come to mind will probably be Realty Income. That makes sense given that Realty Income is the largest player in this niche of the REIT sector. Net leases require tenants to pay most property level operating costs. Across a large enough portfolio, it is a lower-risk investment tactic. The problem with Realty Income is that, as far as the dividend is concerned, it is a slow and steady tortoise. Agree Realty is a smaller peer that has managed to grow its dividend at a more rapid pace.

O Dividend Per Share (Quarterly) Chart

As the chart above highlights, Agree’s dividend growth has easily outdistanced Realty Income’s over the past decade. That’s not to suggest that Agree is achieving huge levels of dividend growth on an absolute basis. But if you are looking at Realty Income as the default play in the net lease niche, you might want to pause for a second and consider its smaller, faster-growing peer. With a portfolio of roughly 2,100 properties, it will be a lot easier for Agree to grow than Realty Income, which has over 15,400 assets in its portfolio.

Agree’s dividend yield is an attractive 4.8% today, notably above the 4.3% yield of the average REIT. And Agree has increased its dividend annually for nearly a decade.

Federal Realty is the (Dividend) King of the REIT sector

If you look at Agree’s dividend streak and think that you’d rather own a stock with a more impressive history, then look no further than Federal Realty. This REIT is focused on owning strip malls and mixed use developments, and it has increased its dividend annually for 57 consecutive years. That makes it a Dividend King. It is the only REIT that is a Dividend King, with its next closest REIT peer over a decade away from reaching this impressive milestone. If consistent dividend growth is important to you, Federal Realty is the stock to look at.

What really sets Federal Realty apart from its peers is its focus on quality over quantity. It only owns around 100 or so properties, but they are generally among the best properties in the areas they serve. The REIT tends to focus on areas with high average net worths and high barriers to entry, and that squeeze a large number of people into a relatively small area. It also invests heavily in its portfolio to ensure its assets are always top-notch. The stock’s yield is about 4.3% today, which is in line with the average REIT. But no REIT can compete with the consistency of Federal Realty’s dividend growth streak.

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Out-of-favor T. Rowe Price has recovery potential

Last up on this list is T. Rowe Price, which is something of a contrarian play. The dividend yield is roughly 4.2%, which is notably higher than the average financial stock’s 1.6% yield, using the Financial Select Sector SPDR Fund (NYSEMKT: XLF) as a proxy. T. Rowe Price’s stock is also down nearly 50% from its 2021 highs. It has increased the dividend annually for an impressive 38 consecutive years.

As an asset manager, T. Rowe Price earns fees for investing money on behalf of its clients. The amount it earns will vary based on client inflows and outflows, but will be most heavily affected by the ups and downs of the market. So T. Rowe Price’s earnings can swing just as wildly as the market does. But the company has no long-term debt on its balance sheet, so there’s a huge financial cushion for the dividend through the bull/bear cycle.

With the S&P 500 near historic highs, however, you might expect T. Rowe Price’s stock to be performing better. The problem is that exchange-traded funds (ETFs) are eating away assets from T. Rowe Price’s core mutual fund operation. This is an issue to watch, but investor assets tend to be sticky. Thus, this is a slow-moving shift.

And T. Rowe Price isn’t sitting still. It is increasingly offering ETFs and other services, like alternative investments, that are in higher demand. Meanwhile, T. Rowe Price is returning value to shareholders via stock buybacks while the share price is low. If you think it sounds like a good idea to invest in a reliable dividend grower willing to invest in its own recovery, you might want to buy T. Rowe Price.

Dividend growth in different forms

To be fair, Agree, Federal Realty, and T. Rowe Price aren’t going to wow you with 20% dividend growth. They are more foundational dividend growth investments, on which to layer higher growth, but also lower-yielding, dividend growth stocks. Where these companies shine is slightly different.

Agree is a way to get more dividend growth than what you could find from the best-known stock in a fairly safe niche of the REIT sector. Federal Realty’s dividend growth streak, at over five decades, is something that investors looking for dividend consistency will love. And T. Rowe Price is a reliable dividend growth stock that’s out of favor, which contrarians will appreciate, noting that the company itself is stepping in to buy shares.

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Reuben Gregg Brewer has positions in Federal Realty Investment Trust and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends T. Rowe Price Group. The Motley Fool has a disclosure policy.

3 Dividend Growth Stocks to Buy Hand Over Fist in June was originally published by The Motley Fool

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