Mousetraps: 9 High-Yield REITs With Risky Dividends

Philip Eric JonesInvesting GroupFollow5ShareSavePlay(17min)CommentsSummaryHigh-yield 'mousetrap' REITs consistently underperform, with significant risk of dividend cuts and capital loss, as evidenced by recent 12-month returns lagging VNQ by over 1,000 bps.Dividend Safety scores are critical; REITs rated F face a 40% chance of a cut within 12 months, often resulting in sharp share price declines.Key danger signals include high payout ratios, weak revenues, and heavy debt loads.Prudent investors should seriously consider reducing exposure to REITs with poor Dividend Safety ratings to avoid underperformance.This idea was discussed in more depth with members of my private investing community, iREIT®+HOYA Capital. Learn More » ISerg/iStock via Getty Images The temptation always exists to reach for high yield as a source of income and a buffer against volatility. But the yield you see is not always the yield you get. Companies can and will cut theirThis article was written byPhilip Eric Jones3K FollowersFollowPhilip Eric Jones is a financial writer, educator, artist, and inspirational speaker. He writes about investing for retirement with a focus on Growth stocks and REITs. He is a contributor to the investing group iREIT®+HOYA Capital. The service features a team of analysts focusing on real income-producing asset classes that offer the opportunity for reliable income, diversification, and inflation hedging. Learn More.Analyst’s Disclosure: I/we have a beneficial long position in the shares of VNQ either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I hold one share of VNQ for reference purposes only. A Buy, Sell, or Hold rating in this article does not constitute a Buy, Sell, or Hold recommendation. All investors should exercise their own due diligence, before investing in any stock.Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.