Don’t Fret
Diminishing
Dividends
Dividends emerged as one
of the most immediate victims
of 2008’s financial instability. Industry
analysts, however, said the strategy
was prudent, given current market
conditions.
“We often see select dividend cuts
in the REIT sector during a time of
decelerating fundamentals,” says
Christine McElroy, an analyst with
Banc of America Securities LLC.
“Many of the dividend cuts today,
however, are related to preservation of
capital during a time when cost and
availability of capital is in question.”
Richard Moore, a managing director
with RBC Capital Markets, dismisses
the notion that the cuts were motivated
by cash flow fears. “Few, if any, REITs
have trouble paying their dividends at
this point,” he says.
UPPERCUT IMAGES/PUNCHS TOCK
Instead, the dividend policy decisions
illustrate REIT managers’ efforts to
address the impact of the ongoing turmoil in the financial markets, according
to Nem Marjanovic, an analyst with
Cornerstone Real Estate Advisers LLC.
“Cutting an expensive dividend—while
maintaining REIT payout requirements—is an effective capital-raising
decision in a tight credit market that is
not contingent upon influences outside
of upper management’s control.”
Go to http://www.reit.com for
more information and the latest data
on REI T dividends.
fact
In the year ended June 30, 2008, only one REIT
market worldwide produced a positive rate of return: South Korea. The Asia and Pacific
regions each saw an approximately 60 percent decline in total rate of return for the year.
• Ernst & Young, “Global REIT Report 2008”
