Private equity firms are taking profits in their portfolio holdings left and right. The third such instance today comes from General Growth Properties Inc. (NYSE: GGP). It has been announced that Blackstone Group L.P. (NYSE: BX) have agreed to sell its 23,431,803 shares of common stock in an underwritten public offering. This may have a significant dividend ramification.
Citigroup will act as sole underwriter of the offering. General Growth Properties will not receive any proceeds from the sale of shares in this secondary offering. What investors need to know here is that this entirely cleans out the portfolio ownership by Blackstone. General Growth gets to be its own show without influence from Blackstone now.
General Growth Properties is seeing a drop of 2.4% to $22.76 on the news. Its 52-week trading range is $15.85 to $23.33, and its market cap is almost $21.4 billion. Investors probably feel lucky that an offering of more than $500 million is not hitting shares harder.
Note that General Growth is a real estate investment trust (REIT). That means that it distributes almost all of its income via dividends to its shareholders. The REIT’s dividend yield is only 2.1%. Blackstone must be looking to redirect client funds for new investments, probably ones with more value and likely to pay more than just a 2.1% dividend.
Many REITs have performed incredibly well, and many of the dividends have gone from high-yield to simply expensive. Investors buying General Growth Properties may want to consider that there are many other REIT alternatives out there that pay well over 2.1% in yield.
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