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Many investors favor REITs for income generation given their history (and legal requirement) of regular dividend payments. This makes studying the sustainability of REIT dividends particularly important.
Curiously, dividend cuts are not fully factored into many REIT share prices. We find REITs that announce dividend cuts usually experience extreme price declines. Therefore, dividend cuts not only lower future income for investors, but also can create significant loss of capital.
We performed a forward-looking analysis on REITs to see which ones may be in danger of dividend cuts, screening for high payout ratios combined with balance sheet and fundamental analysis.
We find many retail REITs, especially mall REITs such as MAC, PEI, and TCO to be in danger of cuts, along with hotel REITs such as PK and office REIT VNO.
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