Image Source: Pexels
Many real estate investment trusts (REITs) face economic and market challenges causing the trusts to cut or suspend their dividends this year. The COVID-19 pandemic created a new operating paradigm by accelerating remote work and online shopping trends. In addition, inflation caused by supply chain disruptions, higher labor expenses, and other input costs affected operations. The U.S. Federal Reserve responded to higher inflation by aggressively raising interest rates and increasing the cost of capital for REITs.The combination of lower demand and higher costs created substantial headwinds for growth and dividend distributions. As a result, many REITs cut or suspended their dividends in 2024. We discuss several of the larger ones in this article Paramount Group (PGRE), SITE Centers (SITC), Uniti Group (UNIT), Medical Properties Trust (MPW), Global Net Lease (GNL), and JBG Smith Properties (JBGS).

Paramount Group 
Paramount Group (PGRE), founded in 1998, is a real estate investment trust (REIT) specializing in commercial properties, primarily high-quality office buildings in major U.S. cities. The company focuses on owning and managing a diverse Class A office space portfolio, positioning itself as a leader in the urban office market. On September 13, 2024, Paramount Group announced the suspension of its regular quarterly dividend. This decision was made to strengthen the company’s balance sheet and maintain financial flexibility, particularly amidst challenges facing the commercial real estate sector, such as high interest rates, lower office occupancy, and increasing hybrid work.  Prior to the suspension, Paramount Group’s dividend yield was approximately 2.8%. With the suspension, the current dividend yield is 0%. The company’s dividend history prior to the suspension was relatively stable until the COVID-19 pandemic. However, the dividend has been declining annually since then.The safety of Paramount Group’s dividend was falling before the suspension, given the cyclical nature of the commercial real estate market and potential risks associated with office space demand. The dividend suspension highlights the company’s need for financial stability and its recognition of the need to navigate current market uncertainties. Source: Portfolio Insight

SITE Centers
SITE Centers (SITC) is a REIT founded in 1994. It specializes in owning and managing open-air shopping centers in suburban areas with high-incomes. The company leases to diverse tenants, including national and regional retailers, restaurants, and service providers. SITE Centers faced significant challenges during the COVID-19 pandemic, leading to a dividend cut in 2020. The dividend was increased and relatively stable until 2024, when the REIT announced a suspension on October 30, 2024, because of high interest rates and commercial real estate headwinds. Prior to the suspension, SITE Centers had a dividend yield of approximately 3.4%, which was decent. Following the dividend suspension, the yield is zero. The REIT’s finances will be more stable now. Source: Portfolio Insight

Uniti Group
Uniti Group, founded in 2015, is a REIT specializing in infrastructure, primarily focusing on fiber and tower assets. The company provides mission-critical communications infrastructure, such as fiber networks and towers. Uniti Group aims to capitalize on the growing demand for data and connectivity by leasing these assets to wireless carriers, data center operators, and other communications and networking providers. Uniti Group announced on August 1, 2024, that its dividend will be suspended because of the impending acquisition of Windstream Holding II. Before the announcement, the quarterly dividend rate was $0.15 per share. It is now zero. This change will improve liquidity for the purchase and lower cash flow requirements for the dividend distribution. Source: Portfolio Insight

Medical Properties Trust
Medical Properties Trust (MPW), founded in 2003, is a REIT specializing in healthcare facilities. It primarily invests in and develops hospitals, inpatient rehabilitation facilities, and other healthcare properties worldwide.On August 22, 2024, MPW announced that it would significantly lower its dividend from $0.15 to $0.08 per share, a 46.7% reduction. This drastic cut was primarily driven by challenges faced by some of its tenants, including Steward Health Care, which led to concerns about the company’s ability to maintain its previous dividend payout.Prior to the cut, MPW boasted a high dividend yield of around 13%, attracting income-seeking investors. However, the substantial rate reduction significantly impacted its yield, lowering it to about 5%, which has risen to 8% on a lower share price.While the reduced dividend may seem more sustainable, MPW faces significant challenges because of struggling tenants, a decline in elective surgeries during and after the pandemic, and liquidity issues. The REIT is selling hospitals and impairing assets. Source: Portfolio Insight

Global Net Lease
Global Net Lease (GNL) is a net lease REIT founded in 2010. It focuses on acquiring a diversified global portfolio of commercial properties through sale-leaseback transactions with corporate tenants. GNL’s property portfolio includes office buildings, retail stores, and industrial facilities. Leases usually have a triple-net lease structure.GNL has faced declining AFFO/S since 2016, leading to distribution cuts. Factors contributing to annual challenges are elevated European income tax expenses, one-time write-offs, the pandemic, hybrid work, the high cost of capital, and the need for liquidity. Many of these factors are ongoing trends.Despite the most recent dividend cut, GNL’s dividend yield is still over 15%. However, the REIT is disposing of assets to strengthen its balance sheet. We expect more dividend cuts in the future. Source: Portfolio Insight

JBG Smith Properties
JBG Smith Properties is a publicly traded office REIT founded in 1968. It focuses on developing, owning, and managing high-quality mixed-use properties, primarily in the Washington, D.C. metropolitan area. JBG Smith is a significant regional player known for its large-scale developments and focus on innovation and sustainability.On February 14, 2024, JBG Smith reduced its quarterly dividend by 22.2% to $0.175 per share. This decision was driven by the company’s desire to prioritize capital for strategic investments in its core markets, the expected performance of its commercial portfolio, and the upcoming delivery of 1,538 multifamily units. The company aims to strengthen its long-term financial position and enhance shareholder value, especially by trying to buy back more shares.Prior to the cut, JBG Smith’s dividend yield was approximately 4.6%. The reduced dividend resulted in a lower yield. The dividend cut improves liquidity by lowering the cash flow requirements. It should allow JBG Smith to acquire additional properties and repurchase shares. We do not expect additional dividend cuts in the near future. Source: Portfolio InsightMore By This Author:3 Worst Performing Dividend Aristocrats In 2024
3 Worst Performing Dow Jones Stocks In 2024
The 3 Worst Performing Dividend Kings In 2024