Interestingly, only two of the 14 REITs on KBW's honor roll had a payout ratio of more than 90% of AFFO in 2011. The rest had even more conservative payout ratios of between 54.2% and 89% of AFFO. Not surprisingly, the price performance of these REITs was stellar. For the five-year period (2005-2010) the KBW Honor Roll REITs returned 71% -- vs. 16% for the Morgan Stanley REIT index and 12% S&P 500. For the 10-year period (2000-2010) those selected in the Honor Roll returned an amazing 424% -- vs. 173% for the Morgan Stanley REIT index and and 15% for the S&P 500.
KBW concluded that “while there is a tremendous amount of focus by REIT investors on net asset value creation, we continue to believe, over time, dividends are a particularly relevant weighing mechanism and ultimately a key factor for investing in the sector,”
Of course, I couldn't help but wonder what a list of non-traded REITs ranked by dividend payout ratio would look like, so I created one using data from the 2010 10Ks. Sadly, of the 45 REITs on the list, only five can boast a payout ratio of less than 95% of FFO (I used FFO because not all NTRs report AFFO, and if they do report AFFO, they do not all calculate it in the same way that publicly traded REITs do). Two of those are hard luck stories - Inland Western had to slash its dividend to 2%, and [url=http://www.reitwrecks.com/forum/viewtopic.php?f=2&t=43]Lighthouse Value Plus REIT I will never see a 74% coverage ratio again in its lifetime[/url]. Except for Northstar, all five of them are closed to new investors.
The lower the payout ratio, the better. Higher payout ratios mean the dividend is being funded with debt and offering proceeds. The higher the ratio, the lower the coverage.
[url=http://www.reitwrecks.com/forum/viewtopic.php?f=19&t=8]Non-Traded REIT Comparison: Dividends, Leverage & Fees[/url]
[url=http://www.reitwrecks.com/forum/viewtopic.php?f=19&t=150]Non-Traded REITs Ranked By Total Assets[/url]