Office REIT Kilroy Realty Corp. last week announced today that it was maintaining its dividend of 49.5 cents per common share for the fourth quarter, while shopping center REIT the Macerich Co. recently boosted its dividend by two cents to 57 cents and Health Care Property Investors raised its dividend by a penny to 83 cents in late October.
Maintaining the dividends is crucial for the publicly held real estate trusts, REIT specialist Craig Silvers tells GlobeSt.com, because dividends have been one of the selling points of REITs for some time. He notes they became even more of a selling point after tech stocks crashed and investors began switching to safer, more reliable returns.
"The main thing that investors want from REITs is security of the dividend," says Silvers, who is president of Los Angles-based Bricks & Mortar Capital, a fund that invests in REITs.
In fact, Silvers says, maintaining the dividend can be even more important than raising it. "If raising the dividend makes investors less secure, then the company shouldn't do it," he says.
What could be wrong with raising the dividend? "Obviously, investors want higher dividends, but not if the REITs have to cut dividends down the road some time because they've paid out too much now in order to raise dividends," Silvers says.
Silvers believes most L.A.-area REITs will maintain their dividends without a problem next year, but the REITs in general have not raised dividends as much this year. However, he believes that some of the nation's REITs will be hard-pressed to maintain the payouts.
"Most REITs have suffered as much as they're going to suffer," from the economic slowdown, he says. He expects apartment and hotel REITs to bounce back first if the economy improves because they can raise their rates faster than office and retail REITs, who must wait for long-term leases to expire. Those same long-term leases, however, have insulated office and retail REITs somewhat from the slump.
On balance, he believes, 2003 could be one of the biggest tests of REIT dividends in years, depending on how the overall economy fares.
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