Five publicly traded equity real estate investment trusts based in the U.S. reduced their dividend payments in 2019, while one REIT suspended its dividend entirely. The amount is roughly in line with recent years, with six REITs cutting back dividend payments in 2018 and five in 2017.
In late March 2019, CBL Properties suspended its dividend for the second and third quarters as part of a class-action lawsuit settlement involving overcharging tenants for electricity at bulk-metered malls. At the time, the company expected to resume its quarterly distribution in January, at an amount based on its taxable income projections for 2020.
In December 2019, CBL announced its decision to suspend all common and preferred stock dividends through the end of 2020 to preserve free cash flow.
"We anticipate a decline in net operating income in 2020 as a result of heightened retailer bankruptcies, restructurings and store closings in 2019. Offsetting these declines by retaining available cash is necessary to maintain the market dominant position of our properties and to reduce debt," CBL CEO Stephen Lebovitz noted in the release concerning the decision.
The most recent REIT to trim its dividend was Virginia-based Medalist Diversified REIT Inc., which declared a cash dividend of 12.5 cents per share in November 2019, down 28.6% from its previous dividend of 17.5 cents per share.
Four REITs slashed their dividend payments earlier in the first half of 2019.
Communications infrastructure REIT Uniti Group Inc. dropped its quarterly cash dividend to 5 cents per share for the first three quarters of the year, 91.7% lower than its prior quarterly dividend of 60 cents per share. The dividend cut stems from an amended credit agreement, as the REIT's primary tenant, Windstream Holdings Inc., faces bankruptcy. Under the amended agreement, Uniti Group is restricted from paying cash dividends in excess of 90% of its taxable income. Uniti Group bumped its dividend up to 22 cents per share for its most recent quarter, much higher than the previous 5 cents per share, but still much lower than its dividend prior to Windstream's bankruptcy announcement.
Diversified Healthcare Trust stated in April 2019 its intention to slash its dividend by more than 50% as part of a lease restructuring agreement with Five Star Senior Living Inc., the REIT's top tenant by rental income. Under the agreement, the REIT would increase its stake in Five Star to about 34% from 8.3%, and in exchange, Five Star's aggregate monthly rent payments would be reduced to $11.0 million from $17.4 million.
Other REITs that reduced their dividends during the year included hotel REIT Ashford Hospitality Trust Inc., which cut its dividend in half on June 14, 2019, to allow the REIT to preserve capital and strengthen its balance sheet, as well as Lexington Realty Trust, which announced its 42.3% cut in February 2019.
S&P Global Market Intelligence also identified 29 REITs with forecast 2019 adjusted funds from operations payout ratios at 100% or higher. The AFFO payout ratio expresses a REIT's annual dividend rate relative to its estimated cash available for distribution for the current year. A payout ratio above 100% implies the REIT's current dividend payment exceeds the cash income it is receiving from its operations that year.
Farmland REIT Farmland Partners Inc. held the highest estimated 2019 AFFO payout ratio of the group, with its annual dividend rate of 20 cents per share far above its consensus AFFO estimate of 8 cents per share for 2019.
Hawaii-based Alexander & Baldwin Inc. and shopping center REIT RPT Realty followed, with estimated payout ratios of 194.9% and 158.0%, respectively.
Four regional mall REITs are also included on the list. Washington Prime Group Inc. holds an estimated payout ratio of 133.3%, while Pennsylvania Real Estate Investment Trust holds a ratio of 110.0%, followed by Taubman Centers Inc. and Macerich Co. at 106.2% and 102.4%, respectively.
S&P Global Market Intelligence identified an additional four REITs that are forecast to report negative AFFO for 2019.
In addition to Medalist Diversified REIT, which announced a cut to its dividend in November 2019, single-family rental REIT Front Yard Residential Corp. was included on the list, with a consensus 2019 AFFO per-share estimate of negative 33 cents per share, along with retail REIT Seritage Growth Properties and office-focused CIM Commercial Trust with estimates of negative 81 cents per share and negative 78 cents per share, respectively.
Four U.S. REITs are not paying regular recurring dividends on their common stock. Office REIT Equity Commonwealth is the largest of the group by market capitalization, followed by CBL, Wheeler Real Estate Investment Trust Inc. and Power REIT.