SPG - These 2 High-Yield Dividend Stocks Might Have to Cut Their Payouts
The so-called "retail apocalypse" is reshaping the retail landscape. Along the way, it has dragged down the fortunes of real estate investment trusts (REITs) focused on malls, where many of the stores going bankrupt and closing are located. But not all malls are going to go away, so there's value to be found in the mall REIT space ... if you tread carefully. The thing is, you can't get suckered in by a big yield; you need to dig deeper than that if you want to avoid getting burned.
CBL & Associates, for example, had a yield of more than 10% when it started to trim its dividend in late 2017. Today, the dividend has been cut to zero. The thing is, it wasn't exactly a shock to anyone who looked beyond this mall REIT's double-digit yield.
In fact, there are usually clear signs that a dividend may be at risk of a cut before a cut takes place. Leading up to the cut CBL was more highly leveraged than its peers, its interest coverage was tight and weakening in the face of industry adversity, and declining funds from operations, or FFO (like earnings for an industrial company), led to an increasing payout ratio. The situation only got worse; CBL's portfolio of malls simply isn't as well positioned to survive the retail headwinds as many of its peers'.