Dividend cuts could be around the corner for these 3 REITs

Orchid Island Capital Corp. (NYSE: ORC) is a finance company that acquires, invests and offers financing in US mortgage-backed securities (MBS). The Florida real estate investment trust (REIT) launched an IPO in March 2013 at a price of $14.50. Its monthly dividend of $0.135 yielded an approximate annual return of 11%.

However, in recent years, the stock price has collapsed and ORC has reduced its dividend payment several times. Orchid’s price was recently below $3, with a dividend of $0.045 per month, or an annual dividend yield of over 18%. The past three quarters have seen negative earnings per share (EPS) and revenue. Obviously, things didn’t go well.

But there was some breaking news for the company this week — Orchid announced a 1:5 reverse stock split, so the stock opened this morning at $13.60.

Reverse stock splits are often viewed as negative by Wall Street and are sometimes a desperate move by a troubled company trying to avoid delisting or simply boost its image. With this reverse split, Orchid declared a monthly dividend of $0.16 per share. When adjusted for the split, that equates to a decline of nearly 29%, which may not be the end of the company’s dividend cuts this year.

New York Mortgage Trust Inc. (NASDAQ: NYMT ) is another REIT with a similar business model to ORC. NYMT stock has fallen from $5 before the 2020 COVID-19 pandemic to less than $1. It has since struggled to return to pre-pandemic levels and opened at $2.84 today. Declining revenue and negative EPS contributed to the decline in the share price. Additionally, it has missed analyst estimates for the past four quarters.

Despite these negatives, NYMT’s dividend is still $0.40 per share, or over 14% annually. But the dividend is only half of the 2019 amount and, unless things turn around quickly, could be halved again in the near future.

Office Properties Income Trust (NYSE: OPI) invests in housing REITs. OPI is a Massachusetts-based real estate company that owns, leases and manages office space. Many of its tenants are stable and its portfolio includes government offices. However, OPI stock has fallen from $48 in September 2018 to $18 today. Declining revenue since 2019 and more recently negative EPS are likely factors behind the price loss. But another big reason was the quarterly dividend cut in January 2019 from $1.72 to $0.55.

Today, OPI continues to pay $0.55 per quarter ($2.20 per year), yielding more than 12%. However, in volatile markets like 2022, investors want more than ever to see increased revenue and earnings per share. So they avoid stocks like OPI, even with attractive dividend yields. So looking ahead, OPI looks to be another REIT that may need to cut its current dividend unless it can turn around declining revenue and EPS.

Highlights of today’s real estate investment news

  • The private debt investment platform Percent is launching a new corporate debt offering for Tiger, an international VC-backed software company, with an APY of 15-17%. The platform’s recent 1H update shows an average historical return of 12.38%.

  • The CalTier Multi-Family Portfolio Fund recently completed a new investment in a portfolio of four apartment buildings consisting of 185 units. The CalTier Multi-Family Portfolio Fund is one of the few non-traded real estate funds available to non-accredited investors and has a minimum investment of $500. Year to date, the fund has produced an annual cash return of 7.02%.

Find more real estate investment news and deals at Benzinga Alternative Investments

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