A REIT to Avoid

Marc Lichtenfeld By Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Safety Net

SafetyNet Pro rates 104 real estate investment trusts (REITs). Of those, only 14 currently receive F ratings for dividend safety.

Columbia Property Trust (NYSE: CXP) is one of them.

The company owns office buildings in major metropolitan areas. Cash flow growth stagnated in 2015 and reversed lower last year.

In 2017, it’s expected to drop another 13%, as fourth quarter occupancy declined 2.4 percentage points over the same period last year.

Funds from operations (FFO), a measure of cash flow used by REITs, fell to $1.51 per share in 2016 from $1.93 a year before.

In 2017, Wall Street expects FFO to slide to $1.31 per share.

A fall in cash flow is the top way to get downgraded by SafetyNet Pro.

The fact that FFO tanked in 2016 and will do so again in 2017 hurts the stock’s rating. It’s not helping that 2016’s total is below that of 2015 – and the two years before that.

Things were already looking dire for Columbia Property Trust’s dividend safety rating. And then it committed the worst sin imaginable in my book and in SafetyNet Pro’s


It slashed its dividend.

On February 9, the company said it would reduce its quarterly dividend to $0.20 per share from $0.30, giving the stock a 3.4% yield.

Once a company has shown it’s willing to cut its dividend, you have to think it could do it again.

Decaying cash flow combined with the dividend cut pushed Columbia Property Trust over the dividend-safety cliff and earned it SafetyNet Pro’s lowest rating.

Dividend Safety Rating: F

If you have a stock whose dividend safety you’d like me to analyze, please leave a comment with the ticker symbol.

Good investing,

Marc