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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grommit who wrote (33820)	3/17/2009 1:33:34 AM
From: Paul Senior	1 Recommendation Read Replies (1) \| Respond to of 78755

Yes, makes sense if I consider that the distribution is a stock dividend - a combination cash dividend and a mandatory rights offering. But I don't consider it as such. I buy these reits for the cash distributions. Not as something where management arbitrarily makes the stock/cash decision and maybe the other stockholders decide (vote) the ratio of cash/stock. (And of course the majority elect all cash. Which means everybody gets mostly stock) It's also a management decision that worries me - it may be by necessity one step above the other alternative of a distribution cut or elimination. And another thing I don't like is that whether I sell the shares distributed to me or hold on to them, the value of the distribution -- unlike a regular stock dividend -- is taxable income in the year of receipt (for reits held in a USA taxable account.) So the way I consider it is that the company reneges on sort of an implicit agreement to pay cash, instead issues me stock and I've got to pay tax on it (in taxable account). This is not what I want from a reit. I want to be receiving money...not paying it out. Not criticizing you or anyone else who might have reits and has determined the stock distribution is okay for them. It might work out very well -- getting shares at low prices now when the reits are out-of-favor. And if/when cash distributions are fully reinstated, getting that cash on a larger number of shares.

To: Grommit who wrote (33820)	3/17/2009 1:34:29 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78755

The whole mess with these stock dividends is just BS and shows how bad the fundamentals of the REIT sector really are. the stock dividend really means a dividend cut, nothing else. It creates amongst other things a steady supply of stock at given dividend dates that is partly being sold. great for the shorts probably but for the shareholders? It does make the preferred look better at least in relative terms.For one thing we have cash versus paper but we also have the fact that the REIT preserves cash for the holders of debt and preferred. If these REITs were really worth what management and some brokerage reports are saying the solution would be simple: Sell properties and deleverage buying back discounted preferred and debt. But of course nobody is buying CRE right now, which of course means that these NAV are really BS as well by my logic. That said, preserving cash may be the only way for these REITs to survive, but then they should just call it what it is - a dividend cut to zero, IMO. The whole thing makes me think that this is just an industry to be avoided for at least a year if not more.