Amid the dividend-increase announcements by more than half of US real estate investment trusts in 2022 and a fresh batch of dividend hikes by 23 REITs during the first two months of 2023, a handful of REITs went the opposite direction and opted to reduce their dividends.

CorEnergy's dividend suspension

Energy infrastructure-focused REIT CorEnergy Infrastructure Trust Inc. announced Feb. 6 that the company will halt dividend payments on both its common stock and 7.375% series A cumulative redeemable preferred stock. The suspension was mainly due to declining volumes and higher costs in its California systems.

"Our fourth quarter saw consistent, elevated volumes transported on our Crimson systems, pending restart of another pipeline serving central California producers," said Chairman and CEO Dave Schulte in the company's March 7 earnings report, summarizing the circumstances that led to the dividend reduction. "That pipeline restarted in February, resulting in volume reductions which we expect to continue in future periods. The State of California has also added new maintenance and inspection requirements that will increase Crimson's cost of service."

Schulte added that while the REIT continues to see steady results from its Missouri natural gas assets, the changes in California's market conditions have lowered the cash available for distribution in the near term.

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Apart from the temporary dividend suspension, the REIT also implemented other measures in response to the current market situation, such as corporate structure realignment, reducing corporate general and administrative expenses, and slashing 2022 incentive bonus payouts. Senior management also took a 10% salary reduction.

In addition to CorEnergy's recent suspension, six other REITs are not currently paying regular dividends on their common stock.

Dividend cuts

Seven REITs lowered their dividends since early 2022, with the biggest cut announced July 14, 2022, by Industrial Logistics Properties Trust. The industrial REIT decided to cut its quarterly distribution by 97% to 1 cent per common share.

The REIT revealed that due to the deterioration in real estate market conditions and unforeseen interest rate hikes, the company was unable to complete the long-term financing plan for its acquisition of Monmouth Real Estate Investment Corp., which closed Feb. 25, 2022. The dividend cut was implemented to improve the REIT's liquidity until the completion of the said financing plan.

Another huge cut was announced by office-focused Franklin Street Properties Corp. on July 5, 2022, slashing its quarterly dividend by 88.9% to 1 cent per share. The REIT also adopted a variable quarterly dividend policy under which the company's board will determine quarterly payouts based on different factors.

"We believe that the new variable quarterly dividend policy better aligns with the transactional nature of our 2022 objectives, resulting in a more precise and flexible capital allocation platform," said Franklin Street Chairman and CEO George Carter.

Aside from the two aforementioned REITs, other companies that announced lower distributions since 2022 include diversified REITs Medalist Diversified REIT Inc. and Gladstone Commercial Corp., and office REITs Douglas Emmett Inc., Vornado Realty Trust and SL Green Realty Corp.

More than half of US REIT dividends exceed pre-pandemic levels

Roughly 50.7% of publicly traded US REITs are paying higher dividends compared to their pre-pandemic levels reported at the end of 2019, according to S&P Global Market Intelligence data. In addition, 9.3% of the REITs are paying out the same amount of dividends as they did before the pandemic. On the other hand, dividends for approximately 40% of the industry are still lower than their pre-pandemic levels.

Single-family rental REIT American Homes 4 Rent leads the list of REITs with the largest increase in dividends since 2019-end, quadrupling its payout to 22 cents per share from 5 cents per share at the end of 2019. Three REITs doubled their dividend payments since 2019: communications-focused SBA Communications Corp., industrial-focused Rexford Industrial Realty Inc. and single-family rental REIT Invitation Homes Inc.