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Real Estate Investment Trusts
Real estate investment trusts (REITs) borrow to invest in real estate and are required by law to pay out hefty dividends to shareholders. But with real estate values falling and the credit markets still in disarray, REIT dividends are getting squeezed.
"Over-levered balance sheets are causing REITs to reconsider dividend policies," Wordell says.
On the edge: It's hard to pick one, because nearly every REIT faces similar challenges. A change in U.S. tax regulations in December allows REITS to pay out dividends in equity. "That's going to be a big surprise to investors who are expecting to get cash," Shinnick says. On Jan. 30, Simon Property Group (SPG) said it would pay only 10% of its quarterly dividend in cash. In response, the REIT's shares dropped 8%.
