REIT Dividends Crumbling With Commercial Real Estate Values

There were $16.6 billion in dividend cuts in the S&P in the first quarter, and REIT dividends were not immune as commercial real estate values and NOI came under pressure with rapidly deteriorating economic conditions. Arbor Realty Trust (ABR), iStar Financial (SFI) and Grammercy Capital (GKK) all eliminated their fourth quarter dividends. Click here for more background on declining values in commercial real estate (includes charts and market analysis).

Market Watch reported that Friday’s stock market fall had the S&P 500 Index near its bear-market low as companies listed on the broad-market index engaged in another record-breaking quarter of slashed dividends. Unfortunately, it is not likely that REITs will buck the trend. As you may already know, fear drove gold futures above the $1,000-an-ounce mark.

Banks also got killed, with shares of Bank of America and Citigroup among the leading decliners. “Given the uncertainty with corporate earnings, gold is one area investors should be looking at to hedge themselves against the perception that the dollar decline is somewhere on the horizon,” said Dan Greenhaus, an analyst at Miller Tabak.

Dividend reductions within the S&P 500 in the fourth quarter of 2008 came to a record $15.9 billion, according to Howard Silverblatt, senior index analyst, Standard & Poor’s.

“Now, 50 days into the quarter, the record has already been broken, with 26 issues cutting $16.6 billion,” the analyst said, adding that further cuts are expected. First quarter REIT dividends have yet to be fully declared, but sector-wide ugliness will likely prevail in parallel with the S&P pay outs. It is quite likely that the majority of whatever is declared and paid will be paid in stock. Click here for a list of REIT Dividends being paid in stock. And stay tuned for a run-down of next quarters’ dividend declarations.