Choosing between Federal Realty Investment Trust (NYSE:FRT) and Realty Income (NYSE:O) requires balancing a focus on premium local quality against the safety of international scale. Both companies have long histories of rewarding shareholders, but they follow very different paths to growth.
Federal Realty concentrates on a small number of high-value shopping centers in specific metropolitan hubs, while Realty Income utilizes a triple-net lease model across thousands of standalone buildings. These structural differences mean each real estate stock reacts differently to economic shifts and interest rate changes.
The case for Federal Realty Investment Trust
Federal Realty focuses on high-quality mixed-use properties. The company owns roughly 104 properties that combine retail shopping centers with residential or office space in high-barrier coastal markets. Recent activity includes the acquisition of the Congressional North Shopping Center for $72.3 million in March of 2026.
In its 2025 fiscal year (FY), revenue reached $1.3 billion, representing a 6.3% increase over the previous year. Net income available for common shareholders for the period was $403 million. This growth was supported by strategic property turnover, including the sale of a Falls Church shopping center for $58 million in June of 2026.
As of its December 2025 balance sheet, the debt-to-equity ratio was 1.5x, meaning the company carries $1.50 in total debt for every dollar of shareholder equity. The current ratio, which measures the ability to cover short-term bills with short-term assets, stood at roughly 1.0x. Free cash flow, calculated as cash from operations minus capital expenditures, was $331 million during the 2025 fiscal year.
The case for Realty Income
Realty Income operates a massive portfolio of more than 15,500 properties across all 50 states and several European countries. The company uses a triple-net lease structure, where tenants like 7-Eleven and Dollar General pay for taxes, insurance, and maintenance. This model provides highly predictable cash flow, which the company uses to pay its famous monthly dividend.
In FY 2025, revenue rose to $5.7 billion, a 9.1% increase compared to the prior year. Net income reached nearly $1.1 billion. The company continues to expand aggressively, highlighted by its January 2026 entry into the Mexican market and the acquisition of an Ohio-based Lowe’s property for $18.9 million.
As of the December 2025 balance sheet, the company maintained a debt-to-equity ratio of 0.8x. This indicates a lower level of leverage relative to its equity than many of its peers. The current ratio was 0.5x, and the company generated $4 billion in free cash flow during the 2025 fiscal year.
Risk profile comparison
Federal Realty faces risks from its heavy concentration in major coastal metropolitan markets. Economic downturns in these specific regions can have a disproportionate impact on its rental revenue and occupancy levels. Furthermore, the company is vulnerable to the health of its anchor tenants, as large-format retail bankruptcies could leave significant vacancies that are difficult to fill quickly. It also competes for premium space with companies like Kimco Realty.
Realty Income carries risks related to its aggressive expansion into new verticals like data centers and international markets. These new ventures require management expertise that may differ from its traditional retail core. Additionally, the company relies heavily on consistent access to capital markets to fund its acquisitions. This makes it sensitive to interest rate fluctuations and competition from other large net-lease players like W. P. Carey.
Valuation comparison
Federal Realty Investment Trust appears to be the more affordable option for investors based on the sales multiple but is pricey based on earnings estimates.
Sector benchmark uses the SPDR XLRE sector ETF. Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.
Which stock would I buy in 2026?
Investing in real estate investment trusts (REITs) is a great way to gain passive income. REITs offer substantially higher dividend yields than many dividend-paying companies. Federal Realty Investment Trust and Realty Income are two prominent REITs to consider. Both are worth owning shares in, making the choice between them a tough call.
Federal Realty Investment Trust delivered an outstanding first quarter. Its Q1 diluted earnings per share (EPS) soared to $1.81 from $0.72 in the prior year as revenue rose to $341.1 million compared to $309.2 million in 2025. The company raised its full-year guidance, which helped to propel its stock to a 52-week high of $126.41 in June.
Realty Income is a solid income generator that has raised its dividend for 114 consecutive quarters. Its Q1 sales jumped up to $1.5 billion from $1.4 billion in 2025.
However, Realty Income’s Q1 diluted EPS was $0.33, which is substantially lower than Federal Realty Investment Trust’s Q1 result. Moreover, the company cut its 2026 guidance from diluted EPS of at least $1.65 to $1.60.
Federal Realty Investment Trust is doing well, and its premium properties boasted nearly a 94% occupancy rate. These factors and its higher diluted EPS make it the better REIT to purchase over Realty Income at this time. Because Federal Realty Investment Trust’s forward earnings multiple is elevated after the run-up in its share price, the prudent approach is to wait for the stock to drop before buying.
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Robert Izquierdo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
Federal Realty Investment Trust vs. Realty Income: Which Real Estate Stock Is a Better Buy in 2026? was originally published by The Motley Fool
