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Highlights include Avalon Bay (AVB - Analyst Report), Boston Properties (BXP - Analyst Report), Simon Property Group (SPG - Analyst Report) and Vornado Realty (VNO - Analyst Report).

Due to steep share price declines, equity REIT dividend yields are the now the highest they have been since 1990. On average, equity REIT yields are now over 10%. The highest yields are in lodging (19%), Industrial (16%), Apartments (12%) and retail (10%). The spread between REIT yields and the 10-year treasury are now at historical highs.

While the yields are attractive, many companies have cut their dividends over the past couple of quarters, and the pain is not over. More dividend cuts are coming as companies deal with declining cash flow in 2009.

Stick with companies that are covering their payout from operating cash; this makes large cuts less likely. Two large cap names that have not yet cut their dividend are Avalon Bay (AVB - Analyst Report) and Boston Properties (BXP - Analyst Report), two well-capitalized companies that should weather the real estate downturn better than peers.

Also, beware -- some REITs are taking advantage of new IRS rules to pay up to 90% of their dividends in stock. Some large-cap REITs that have elected to pay a portion of their dividend in stock are Simon Property Group (SPG - Analyst Report) and Vornado Realty (VNO - Analyst Report). More will follow suit as companies look for creative ways to keep more cash, but investors are still required to pay tax on stock dividends.

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