SPG - You Can't Control Dividend Cuts but You Can Control What You Do About Them
2023-06-24 11:00:00 ET
Advance Auto Parts (NYSE: AAP) cut its dividend by 80% when it reported first-quarter 2023 earnings. Annaly Capital Management 's (NYSE: NLY) dividend has been falling for a decade and was just slashed again. Simon Property Group (NYSE: SPG) cut its dividend in 2020 when the coronavirus pandemic was in full swing. And Dominion Energy trimmed its dividend when it sold a major division. Dividend cuts happen, and you will eventually have to deal with one yourself. Here's the way to tackle this headache without losing too much sleep.
Of the stocks listed above, mortgage real estate investment trust (REIT) Annaly has the brightest red flag. Although REITs are specifically designed to pass income on to investors in the form of dividends, not all REITs have achieved the same level of dividend success. While Annaly's 12.5% yield might be tempting, even the most cursory look at its dividend history would show you that it isn't a reliable long-term dividend stock.
In fairness, a single dividend cut shouldn't lead to an instant no. But the 10-year-long downtrend at Annaly is a clear warning sign for investors. In fact, any more than one cut should lead to some serious questions about the sanctity of the dividend, with investors probably better off erring on the side of caution.
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You Can't Control Dividend Cuts, but You Can Control What You Do About Them