VEREIT (VER) slashes its dividend
Last week VEREIT announced its first quarter 2020 operating results. As was expected, VEREIT was hit by the COVID-19 pandemic. A number of tenants weren’t able to pay any rent. If we look at the press release, we see that VEREIT received approx. 81% of April rent and approx. 78% of May rent. The majority of the casual dining tenants didn’t pay their rent even so did 50% of the restaurants.
Due to the economic uncertainty related to COVID-19, on May 18, 2020, the Company’s Board of Directors declared a reduced quarterly dividend for the second quarter of 2020 of $0.077 per share from $0.1375 per share. So, VEREIT cuts its dividend by 44%.
Glenn J. Rufrano, Chief Executive Officer, stated, “While we would have normally expected 100% rent receipts for April and May, given current conditions, the actual receipts approximating 80% are a tribute to our quality tenants and portfolio diversification. The Board’s decision to reduce the dividend this quarter is not based generally upon a micro review of our business, but more importantly, on a macro review of an uncertain economy. We chose this base amount on which to build the dividend while protecting against any increase in debt. As more information is available in each of the next two quarters, this decision will be under constant review.“
Furthermore, given the economic uncertainty and rapidly-evolving circumstances related to COVID-19, the Company has withdrawn its previously issued 2020 guidance and is not providing an updated outlook at this time.
The new dividend amount represents an annualized dividend amount of $0.308 per share, reduced from $0.55. The dividend yield on current price is 6.20%.
My Vrijheid Fonds consist of 100 shares of VEREIT (VER) and with this 44% decrease, my total projected dividend loss for 2020 will be €8.27 ($9.07) after taxes. In 2020 VEREIT will pay me €34 ($37) in dividend after taxes.
Okay the dividend cut did not come as a surprise. With the COVID-19 lock down, a lot of companies are struggling. They received rent relief requests from about 34% of their tenants. This dividend cuts hurts, just like any other dividend cut.
The question is, what to do with my shares of VEREIT. Before I take action I want to wait to see what the COVID-19 depression will bring us more. The lock down is slowly lifted, and more and more people are going outside again. So hopefully the restaurant business will also pick up soon.
Furthermore, VEREIT is still reducing its debt. Their debt/equity ratio at this moment is 1.0. If I look at their balance sheet and press release, this dividend cut makes sense to me. All this together and because VER only makes up 0.37% of my Vrijheid Fonds, I decided not to act at this moment.
What do you think of this dividend cut? And how much do you miss out in dividend as a result of this dividend cut? And of course, what will you do with you shares of VEREIT?
That’s all folks! Thanks for reading. Be sure to leave a comment at the bottom – I love to hear your thoughts and opinions.
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