Investors love dividend stocks because they provide dependable income and give investors a great opportunity for solid total return. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the actual investment or portfolio return consists of dividend income and stock appreciation.
However, sometimes dividend stocks bite investors by either lowering their dividends or eliminating them outright. That typically will cause a company to crater and the stock price to plummet.
We screened our 24/7 Wall St. dividend stock research database, looking for companies that could feasibly implode, and we wouldn’t touch any of them with a 10-foot pole. All have announced a big dividend cut, and the shares could be in serious trouble.
Armour Residential REIT
This company slashed its dividend by 40% to $0.24 from $0.40. Armour Residential REIT Inc. (NYSE: ARR) invests in residential mortgage-backed securities (MBS) in the United States.
The company’s securities portfolio primarily consists of the United States Government-sponsored entities (GSE) and the Government National Mortgage Administration’s issued or guaranteed securities backed by fixed rate, hybrid adjustable rate, and adjustable-rate home loans, as well as unsecured notes and bonds given by the GSE and the United States treasuries, as well as money market instruments.
It also invests in other securities backed by residential mortgages for which a GSE or government agency does not guarantee principal and interest payment. The company has elected to be taxed as a real estate investment trust under the Internal Revenue Code.
As a result, it would not be subject to corporate income tax on that portion of its lowered net income that is distributed to shareholders.
Permian Basin Royalty Trust
Earlier this week, this company announced a dividend cut of 32.48% by slashing their dividend to $0.1060 from $0.1570. Permian Basin Royalty Trust (NYSE: PBT), an express trust, holds overriding royalty interests in various oil and gas properties in the United States.
The company owns a 75% net overriding royalty interest in the Waddell Ranch properties comprising
- Dune, Sand Hills (Judkins)
- Sand Hills (McKnight)
- Sand Hills (Tubb)
- University-Waddell (Devonian)
- Waddell Fields is located in Crane County, Texas.
It also holds a 95% net overriding royalty in the Texas Royalty properties, which consist of various producing oil fields, such as
- Yates
- Wasson
- Sand Hills
- East Texas
- Kelly-Snyder
- Panhandle Regular
- N. Cowden
- Todd
- Keystone
- Kermit
- McElroy
- Howard-Glasscock
- Seminole and others located in 33 counties in Texas
Its Texas Royalty properties comprise approximately 125 separate royalty interests containing about 51,000 net-producing acres. The company was founded in 1980 and is based in Dallas, Texas.
PermRock Royalty Trust
This is another oil royalty company slashing their payout from $0.04 to $0.03, a 25% cut for investors. PermRock Royalty Trust (NYSE: PRT) owns 80% of the net profits interest in the oil and natural gas production properties acquired by Boaz Energy II, LLC in the Permian Basin, Texas.
Its underlying properties comprise
- 22,997 net acres, which include 2,434 net acres on the Central Basin Platform of the Permian Basin in Hockley and Terry counties, Texas
- 1,667 net acres on the Central Basin Platform of the Permian Basin in Terry and Cochran counties, Texas
- 14,727 net acres on the Eastern Shelf of the Permian Basin in Glasscock, Schleicher, Stonewall, and Coke counties, Texas
- 4,169 net acres on the Central Basin Platform of the Permian Basin in Ward, Crane, Terry, and Ector counties, Texas
New York Mortgage Trust
Investors can expect a massive 33% drop in their passive income from this company, which cut the dividend to $0.20 from $0.30. New York Mortgage Trust. Inc. (NASDAQ: NYMT) acquires, invests in, finances, and manages mortgage-related single-family and multi-family residential assets in the United States.
Its targeted investments include:
- Residential loans
- Business purpose loans
- Structured multi-family property investments
- Mezzanine loans to owners of multi-family properties
- Non-agency residential mortgage-backed securities
- Agency RMBS; commercial mortgage-backed securities
- Single-family rental properties
- Mortgage, residential housing, and credit-related assets.
Vornado Realty Trust
This company is dropping the dividend payout by 20% to $0.30 from $0.375. Vornado Realty Trust (NYSE: VNO | VNO Price Prediction) is a fully integrated real estate investment trust with a portfolio of premier New York City office and retail assets and the developer of the new PENN DISTRICT.
While concentrated in New York, Vornado owns the premier Chicago and San Francisco assets. Vornado is a sustainable real estate industry leader, with over 27 million square feet of LEED-certified buildings and over 23 million square feet at LEED Gold or Platinum.
WP Carey
Another well-known REIT is dropping its dividend by almost 20% to $0.86 from $1.07. W P Carey, Inc. (NYSE: WPC) ranks among the largest net lease REITs with a well-diversified portfolio of high-quality, operationally critical commercial real estate, which includes 1,413 net lease properties covering approximately 171 million square feet and a portfolio of 86 self-storage operating properties, pro forma for the Spin-Off of NLOP, as of September 30, 2023.
With offices in
- New York
- London
- Amsterdam
- Dallas
WP Carey company invests primarily in single-tenant, industrial, warehouse, and retail properties in the U.S. and Northern and Western Europe under long-term net leases with built-in rent escalations.
The real estate sector was hit hard this year, and oil has been hammered over the last 90 days, impacting companies that invest in those two sectors. Investors likely see more cuts, mainly from office REITs in big cities, as the work-from-home trend grows.
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