Dividend Cuts Could Be Right Around The Corner For These 3 REITs

Orchid Island Capital Corp. ORC is a finance company that acquires, invests in and offers financing from U.S. residential mortgage-backed securities (MBS). The Florida mortgage real estate investment trust (REIT) initiated an IPO in March 2013 at a price of $14.50. Its monthly dividend of $0.135 returned an approximate annual yield of 11%. 

However, in the last few years, the stock price has floundered, and ORC has reduced its dividend payment several times. Orchid’s price had recently been below $3, with a dividend of $0.045 per month or an annual dividend yield of over 18%. The last three quarters have seen negative earnings per share (EPS) and revenue. Clearly, things have not been going well.

But there was breaking news on 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 seen as negative by Wall Street and are sometimes a desperate move by a troubled company trying to avoid a delisting or simply to pump up its image. With this reverse split, Orchid announced a monthly dividend of $0.16 per share. When adjusted for the split, that equates to a nearly 29% reduction which might not be the end of the company's dividend cuts this year.

New York Mortgage Trust Inc. NYMT is another REIT with a similar business model to ORC. NYMT stock dropped from $5 before the 2020 COVID-19 pandemic to less than $1. It has struggled to return to pre-pandemic levels ever since and opened at $2.84 today. Declining revenue and negative EPS have contributed to the declining share price. Additionally, it has missed analysts’ estimates for the last 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 its 2019 amount, and unless things turn around quickly it could be cut in half again in the near future.

Office Properties Income Trust OPI invests in mortgage 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. Yet OPI stock has fallen from $48 in September 2018 to $18 today. Declining revenue since 2019 and more recently negative EPS are probable factors behind the price loss. But another major reason was a quarterly dividend cut in January 2019 from $1.72 to $0.55. 

Today, OPI continues to pay out $0.55 per quarter ($2.20 annually), yielding over 12%. However, in volatile markets such as 2022, investors more than ever want to see increased revenue and EPS. So they shun stocks like OPI, even with attractive dividend yields. So looking to the future, OPI seems to be another REIT that may have to cut its current dividend unless it can turn the declining revenue and EPS around.

Today’s Real Estate Investing News Highlights

• The private debt investment platform Percent is launching a new corporate debt offering for Taiger, an international, VC-backed software company, with a 15-17% APY. The platform’s recent H1 update shows an average historical yield of 12.38%.

• The CalTier Multi-Family Portfolio Fund recently completed a new investment in a portfolio of four multi-family properties 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 annualized cash-on-cash return of 7.02%.

Find more news and real estate investment offerings on Benzinga Alternative Investments

Image by larry1235 on Shutterstock