When a company has very high debt, and high dividend, don’t select that company for the dividend income strategy. Because management, irrespective of results, can determine to cut the dividend to save cash.
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Except for Reit’s, they are obligated to pay out their dividend.
IIPR is having problems with some of their tennants paying and I wouldn’t suggest buying them at this time. It is possible they have to reduce their dividend if some of their tennants claim bankruptcy.
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REIT’s are only obligated to pay 90% of the net income, and most REIT’s pay more than 100% of their net income, because the FFO calculation involves D&A (Depreciation and Amortization).
From my REIT investing days (I still time to time buy a few, but one point I had as much as 40% in REIT common and preferred), I had this study which showed the REIT’s that had lower leverage provided overall total return, than the REIT’s with higher leverage.
Higher dividend yield means higher risk, alternatively, even when risk is not above average, then you are not getting any growth, for ex, like $VZ. That’s why you should focus on total return. Don’t just focus on dividend alone.
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I generally don’t invest in companies for the Dividend, I invest in the growth. The reason I was in IIPR was because at one time it had great growth and I made some good money off of it. But when it started slowing down I was out. If you want to understand Reit’s better get Ralph Block’s book. It explains it all but he liked AFFO over FFO.
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