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Vornado (VNO) Announces a 29.2% Cut in Quarterly Dividend

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Vornado Realty Trust (VNO - Free Report) declared a 29.2% cut in its quarterly dividend. The company will now pay 37.5 cents per share in dividends from 53 cents paid out earlier. The reduced dividend will be paid out on Feb 10 to common shareholders of record as of Jan 30, 2023.

VNO noted that the dividend cut is “in recognition of the current state of the economy and capital markets.” The company’s reduced projection for 2023 taxable income mainly due to higher interest expenses resulted in the dividend cut.

Although Vornado has a portfolio of top-quality office spaces located in a few select, high-rent, high-barrier-to-entry markets of New York, Chicago and San Francisco, a choppy office market environment is likely to affect its leasing volume in the near term.

Intense competition from developers, owners and operators of office properties and other commercial real estates, including sublease space available from its tenants, is likely to curb Vornado’s ability to attract and retain tenants at relatively higher rents. Rising interest rates amid an inflationary environment are expected to add to the company’s woes.

Earlier, the pandemic-led business disruptions had resulted in lower rental income and occupancy erosion at its properties, leading to lower cash flow available for distribution.

In July 2020, the company made a 19.7% sequential reduction in its quarterly dividend to 53 cents per share amid uncertainties caused by the pandemic and continued this payout. The company paid out a quarterly cash dividend of 66 cents per share prior to that dividend cut.

Shares of this Zacks Rank #4 (Sell) company have gained 5.6% in the past three months, underperforming the industry’s rally of 14%.


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Stocks to Consider

Some better-ranked stocks from the REIT sector are VICI Properties Inc. (VICI - Free Report) and STAG Industrial, Inc. (STAG - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

The Zacks Consensus Estimate for VICI Properties’ 2022 funds from operations (FFO) per share has moved 3.2% north to $1.92 over the past two months.
The Zacks Consensus Estimate for STAG Industrial’s 2022 FFO per share has been raised marginally over the past month to $2.21.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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