As we head into the second half of 2022, analysts are turning bearish on REITs as the Fed raises interest rates and tightens monetary policy. During periods of inverse correlation, such as 2004, 2013 and 2016, interest rates began to rise as the value of REITs fell.
However, when there are periods of economic growth, REITs tend to rise with interest rates as the value of the underlying assets increases.
Now that the economy is slowing and the Fed is tightening monetary policy, companies like Rocket companies RKT take out fewer mortgages and refinance than before. Given these factors, here are two dividend-paying REITs that may have to cut their dividends in 2022 as economic uncertainty worsens and the Fed tightens.
Claros Mortgage Trust Inc CMTG offers a dividend yield of 8.87% or $1.48 per share per year, making quarterly payments, with an inconsistent history of increasing dividend payments. Claros Mortgage Trust is primarily focused on providing senior and subordinated loans on transitional commercial real estate assets located in major markets in the United States.
Earlier Tuesday, a JPMorgan analyst downgraded Claros Mortgage Trust from neutral to underweight with a price target of $17 per share. In the second quarter of 2022, loan origination activity was $1 billion in total loan commitments across eight investments, compared to $1.8 billion in total loan commitments across eight investments in fourth quarter of 2021.
Jump to: This high-yielding dividend REIT is downgraded as 2-year Treasury yield exceeds average corporate dividend yield
Commercial Real Estate Financing Apollo Inc ARI offers a dividend yield of 12.40% or $1.40 per share per year, making quarterly payments, with an inconsistent history of increasing its dividends. Apollo Commercial Real Estate is a real estate investment trust that originates, invests, acquires and primarily manages commercial first mortgage loans, subordinate financings, commercial mortgage-backed securities and other debt investments related to immovable.
On Tuesday, a JPMorgan analyst downgraded Apollo Commercial from neutral to underweight with a price target of $11 per share. Apollo Commercial cut dividends in December 2019 and March 2020, to 40 cents per share and 35 cents per share, respectively.