I am not sure if now is the time to jump into REITS. The ones I do own have already suspended their dividends, so I am not sure if that is a good sign or not. REITS need to pay 90% of their income out in dividends. However, no income means that shareholders will get nothing.
ProLogis (PLD) took a sharp nosedive earlier this month. It went down sharply from $40 a share at the end of September to about $13 a share at the end of October. I was thinking that $12 seemed like a fair price and then it went down to $8 and is now at $5.
AMB has held up a lot better, only declining from $40 to around $14.
ASSOCIATED PRESS
SAN FRANCISCO (AP) - AMB Property Corp. announced Monday it is suspending its fourth-quarter dividend as part of an overhaul of its dividend policy aimed at increasing cash reserves.
AMB said it will now determine its regular dividend payments by aligning them with its projected taxable income from recurring operations. Under that guideline, AMB expects the company's common stock dividend rate next year will be $1.12 per share.
The company said its board of directors suspended the fourth-quarter dividend because it projects the company has already met its dividend distribution requirement for 2008.
AMB expects the new dividend policy will enable the company to save $53 million in the fourth quarter and $98 million in 2009.
In a regulatory filing last week, AMB said it paid common stock dividends of $1.56 per share for the first nine months of 2008, compared with $1.50 for the same portion of 2007.
The developer of industrial real estate also said it plans to curtail development until the financial markets stabilize, going ahead only with projects to which it has already fully committed or negotiated certain agreements.
The company noted it has sufficient financial capacity to complete building projects in its development pipeline.
As of Oct. 31, the company had $238 million in cash and access to $689 million in credit.
"We believe AMB's actions to suspend the fourth-quarter dividend and to further rationalize capital deployment and expenses ... will better position AMB for the future by enabling the company to take advantage of opportunities that may arise once the economy and financial markets stabilize," Hamid Moghadam, AMB's chairman and chief executive, said in a statement.
AMB shares added 58 cents, or 3.9 percent, to $15.33 in afternoon trading.
The company's shares have traded between $12.88 and $64.32 during the past year.
Tuesday, November 18, 2008
AMB suspends its dividend
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2 comments:
Generally it's not a good sign when these companies cut their dividends. You have to wonder why they're doing it. aAe they really that short on cash? The other thing to realize is that most investors buy REITs for their dividends. So if they aren't paying dividends, most investors will leave REITs.
- charles delvalle
charles.delvalle@gmail.com
ps by the way i'm an analyst for www.investorsdailyedge.com feel free to email anytime.
I agree, the entire point of buying a REIT is the constant and high dividends.
If most of the cash flow that these REITS generated was from the disposition and acquisition side of the equation (essentially flipping the property), then we are indeed screwed.
If most of the cash flow came from operations, i.e. the rents, then we are fine.
The crash in REIT prices indicates that most people think we are screwed, the acquisition and disposition aspects of the equation cannot happen without debt and leverage.
The tide is rolling out, now we see who isn’t wearing shorts.
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