Mousetraps: 9 High-Yield REITS With Potentially Unsafe Dividends

2025-04-07 07:30:00 ET

Summary

• The recent sell-off has increased the temptation to reach for some of the many high-yield REITs, but beware of "mousetrap" REITs with unsustainable dividends.
• Dividend safety is crucial; a cut can lead to plummeting share prices and reduced income, leaving investors with significant losses.
• Seeking Alpha Premium's Dividend Safety score helps identify risky REITs; grades range from A+ (safe) to F (high risk of cuts).
• A grade of F on Dividend Safety means a 40% chance of a dividend cut within 12 months; consider reallocating capital from these high-risk REITs.
• This article identifies 23 potential Mousetrap REITs currently, then takes a closer look at the 9 with Dividend Safety grades of F.

The recent heavy sell-off has left the field strewn with high-yield REITs. The temptation has increased, to reach for high yield, as a buffer against volatility. But the yield you see is not always the yield you get. Companies can and will cut their dividends at any time, though they generally avoid doing so as long as possible.

Even in the best of times, there are always mousetrap REITs. These companies offer alluringly high dividend yields, but in reality, those yields often turn out to be an illusion. In fact, sometimes the reason the yield is so high is precisely because the company is doing poorly, and shares have sold off, but the dividend cut hasn't happened yet....

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