Because Watching Your Income Shrivel is Not a Retirement Strategy
There’s a special kind of heartbreak reserved for REIT investors when a juicy dividend starts to look… not so juicy. If you’ve been chasing yield like a Golden Retriever chasing a tennis ball, you might’ve found yourself with a few dividend duds in your portfolio. Today, we’re looking at three REITs that are waving more red flags than a bullfighting arena. These aren’t the sexy REITs you brag about on Reddit—they’re the kind you hope your friends don’t ask you about.
So, let’s save you from future embarrassment—and potential capital losses—by spotlighting three REITs to sell before they gut their dividends like a fish on a Friday night fishing trip.
Why Dividends Are the Lifeblood of REITs (and Why You Should Care)
Let’s get one thing clear: REITs exist because of dividends. The IRS gives them a special tax exemption as long as they pay out 90% of taxable income to shareholders. That’s right—they’re legally obligated to shower you with cash.
But here’s the kicker: when that payout starts looking shaky—when AFFO (adjusted funds from operations) doesn’t cover the dividend, when tenants stop paying rent, or when management borrows like a drunk college student with their first credit card—it’s time to start panicking.
Let’s break down the three biggest offenders in today’s market.
🚨 REIT #1: Medical Properties Trust (NYSE: MPW)
"The Hospital King That’s on Life Support"
What It Is:
MPW is the poster child of healthcare REITs, owning hospitals and acute care facilities around the world. For years, it was praised for offering investors a high yield and solid exposure to a “recession-proof” sector.
But lately? This thing looks about as recession-proof as a dollar store during a fire sale.
Why It’s in Trouble:
-
Tenant Dependence: MPW is highly concentrated in just a few tenants, most notably Steward Health Care, which—spoiler alert—can’t seem to keep its financials in check.
-
Tenant Default Risk: When your biggest tenant can’t pay rent, your dividend is next on the chopping block. MPW recently had to restructure several leases and take rent deferrals. That’s code for “they didn’t pay, and we don’t want to say it out loud.”
-
Debt Overload: MPW’s debt is creeping past $10 billion. With rising interest rates, refinancing is like trying to get a payday loan while already owing five payday lenders.
-
Shareholder Dilution: MPW has been issuing shares like Oprah gives away cars. “You get dilution! You get dilution!” Not good for existing investors.
Dividend Status:
Already cut by 50% in 2023. And guess what? That might not be the last one.
Verdict:
Sell now unless you enjoy watching your passive income become passive disappointment.
🚨 REIT #2: Global Net Lease (NYSE: GNL)
"High Yield, High Drama, and a Balance Sheet from Hell"
What It Is:
GNL invests in commercial properties across the U.S. and Europe, usually with long-term net leases. Sounds boring. And boring is usually good. But not here.
This REIT is what happens when high yield and bad management have a baby—and name it “Unsustainable.”
Why It’s in Trouble:
-
12% Dividend Yield? LOL. Anytime you see a double-digit dividend yield, don’t celebrate. Ask, “What’s the market trying to warn me about?” In this case: A lot.
-
AFFO Coverage is Weak: GNL’s AFFO barely covers the dividend. If a few tenants so much as sneeze, there goes the payout.
-
Horrific Mergers: GNL merged with The Necessity Retail REIT (RTL) in 2023. This was like two broken legs trying to hold each other up. Instead of synergies, we got a circus.
-
High Leverage: GNL's debt is ballooning. Interest expense is eating into cash flow like termites in a log cabin.
-
Interest Rate Sensitivity: With over $2.2 billion in debt and much of it floating rate, GNL is like a deer in the headlights every time the Fed sneezes.
Dividend Status:
Still holding at $0.40 per share per quarter… but nobody’s betting it’ll stay that way. GNL’s payout ratio is unsustainably high, and that dividend is next in line for the guillotine.
Verdict:
This is a yield trap wrapped in a value trap. Sell before your dividend dreams implode.
🚨 REIT #3: Office Properties Income Trust (NASDAQ: OPI)
"The Office is Closed (But the Dividends Keep Coming… For Now)"
What It Is:
OPI owns—you guessed it—office properties. Primarily in the U.S. And if that doesn’t already have you sweating, you haven’t been paying attention since 2020.
This REIT is the equivalent of investing in VHS tapes in the age of Netflix.
Why It’s in Trouble:
-
Post-Pandemic Office Exodus: Office occupancy is still down massively. Remote work is here to stay, and OPI’s buildings are emptying out faster than a Blockbuster in 2009.
-
Shrinking NOI: Net Operating Income is declining as more tenants vacate or renegotiate leases downward.
-
Debt Maturity Wall: OPI has over $2 billion in debt, and maturities are looming. Management has acknowledged they may need to sell assets to pay down debt. That’s never good.
-
Tenants Are Government-Heavy: Sure, the government usually pays its bills—but at what rate? And will they stay? Renewals are questionable. If federal agencies start slashing space needs, OPI is cooked.
Dividend Status:
OPI slashed its dividend in 2023 from $0.55 to $0.25 per share. Don’t get comfortable. That was just a warm-up.
Verdict:
Office REITs are a no-go right now unless you're collecting tax write-offs. This one is circling the drain. Sell and don’t look back.
The Common Thread: Why These REITs Are Toxic
What unites MPW, GNL, and OPI? Here’s a checklist:
-
Overleveraged Balance Sheets: Too much debt, not enough cash flow. Not a winning combo.
-
Unsustainable Dividends: Payout ratios well above 100% of AFFO scream “We’re faking it ‘til we break it.”
-
Tenant Risk: Either too few tenants, or tenants who can’t pay (or both).
-
Poor Management Decisions: Dilution, overpaying for acquisitions, ill-timed mergers—you name it.
You wouldn’t keep a leaking boat just because it was once shiny. These REITs may have had their moment, but the fundamentals have rotted out.
What To Do Instead: Buy Quality
Now that we’ve depressed you, let’s end on a high note.
Here are three REITs that aren’t about to collapse:
✅ Realty Income (NYSE: O)
The monthly dividend company. Solid tenants, great diversification, and a track record of 100+ dividend increases. Boring in the best way.
✅ Prologis (NYSE: PLD)
Logistics REIT with exposure to e-commerce and supply chain infrastructure. You want warehouses, not empty offices.
✅ Agree Realty (NYSE: ADC)
Retail REIT focused on recession-resistant tenants like Walmart, Tractor Supply, and Dollar General. Clean balance sheet and growing dividend.
Final Thoughts: Cut the Losers Before They Cut You
Dividend cuts don’t just hurt your income. They destroy investor confidence, crater stock prices, and make recovery an uphill battle. If you’re holding MPW, GNL, or OPI, now’s the time to ask yourself a hard question:
Do I want to beat the crowd to the exit, or get trampled in the stampede after the next earnings report?
Be proactive. Review your portfolio. Sell the weaklings. Reinvest in REITs that won’t keep you up at night.
Because if there’s one thing worse than losing income—it’s losing income and capital while holding onto a dream that died two balance sheets ago.
Need help finding REITs that are actually worth buying? Or want to rant about the time you held MPW too long? Drop a comment below—let's swap some war stories.
Comments
Post a Comment