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Cohen & Steers Reit and Preferr Message Board

  • joelndll joelndll Nov 15, 2008 5:58 PM Flag

    Let's get our heads together on the "upcoming" divend cut?

    RNP, on 10/31/2008, paid a $ .20 dividend. The NII (Net Investment Income ) was $ .0985 and the ROC ( Return of Capital) was $ .1015. REITS must, by law, distribute 90% of their net investment income. We can, at this jucture, conclude that the future earned dividends will be approximately $1.18 a year
    and must be distributed. At a closing price 11/14/2008 of $6.54 this represents a compelling 18.18%. The NAV on this day was $8.29. Therefore, the DISCOUNT to NAV was 21%.... extremely high. This needs to be explained by someone on this board.Comparing dividends paid on 01/31/2008 of $ .20 wherein $ .1315 was NII and $ .0685 was ROC,we can see the "deleveraging" of selling assets at depressed prices to be compliant.If the underlying REITS and Preferreds pay their dividends, then the dividend should not be cut below $ 1.20 a year. Factoring in the
    historical distributions of ROC, my opinion is
    an annual dividend of $1.80 or $ .15 a month.
    This would make share price ROC of $ .60 a year and hardly a factor to the overall health
    of the underlying common & preferred shares.
    At the level of $1.80 with a close of $6.50,
    the yield is 27% givingshareholders plenty of room for a big "upside" in share price. Lastly: I also think that all the bad news in REITS is already priced in. Uncertainty of the
    dividend for 2009 is one big reason for the
    selloff.

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    • "RNP, on 10/31/2008, paid a $ .20 dividend. The NII (Net Investment Income ) was $ .0985 and the ROC ( Return of Capital) was $ .1015. REITS must, by law, distribute 90% of their net investment income. We can, at this jucture, conclude that the future earned dividends will be approximately $1.18 a year
      and must be distributed. At a closing price 11/14/2008 of $6.54 this represents a compelling 18.18%. The NAV on this day was $8.29. Therefore, the DISCOUNT to NAV was 21%.... extremely high. This needs to be explained by someone on this board."

      The NAV relates to the value of the underlying assets (preferred stock and REIT common) less leverage. It seems that expectations are that these assets will continue falling in market value. And that may be true.

      "Comparing dividends paid on 01/31/2008 of $ .20 wherein $ .1315 was NII and $ .0685 was ROC,we can see the "deleveraging" of selling assets at depressed prices to be compliant."

      I don't think the difference was caused by "deleveraging". If a REIT sells assets at depressed prices, it incurs a tax loss which reduces the required distribution. But, I guess, if the REIT incurs the tax loss and still wants to make the same distributions as before, you would be correct. My guess is that some of the REITs have lessees who had problems paying their rents or it might just be a normal fluctuation caused by depreciation.

      "If the underlying REITS and Preferreds pay their dividends, then the dividend should not be cut below $ 1.20 a year. Factoring in the
      historical distributions of ROC, my opinion is
      an annual dividend of $1.80 or $ .15 a month."

      Good analysis. RNP holds various issues across various industries. Unless we face a catastrophic disaster where all industries are affected, the dividends should hold up well.

    • I have previously guesstimated a cut to .15cents a month- with a worst case of .10cents. Its hard to be precise but the dividend must go down. Redemption of preferreds by selling assets will be a factor, probably no cap gains to distribute; level dividend policy has no guidelines but most probably will be based on nav- not good.For instance policy might be to pay out 10% of nav per year which would equate to 80 cents per year or 50% below my low ball guesstimate.You have to take the long view here next couple of years will be rough.I am buying on all dips below 6.Socking away cash to compensate for lower dividend income next year in most CEFs as leverage is reduced and payouts cut.RRW

    • Nobody knows what the future holds. If we have a real Depression there will be very little income for RNP to distribute. If it's just a brief recession then I agree there is some upside potential.

      Hopefully there will be some new federal rules to prevent excessive leverage in the future, not only in REITs but in everything.

 
RNP
18.47+0.06(+0.33%)Aug 29 4:00 PMEDT

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