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 in 2004, 2013 and 2016, interest rates began to rise while the value of REITs decreased.
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 its monetary policy, companies such as Rocket Companies (NYSE:RKT) are underwriting fewer mortgages and refinances than before. With these factors in mind, here are two dividend-paying REITs that may have to cut dividends in 2022, as economic uncertainty worsens and Fed hawkishness tightens.
Claros Mortgage Trust Inc (NYSE:CMTG) is offering a dividend yield of 8.87% or $1.48 per share annually, making quarterly payments, with an inconsistent track record of increasing dividend payments. Claros Mortgage Trust is focused primarily on originating senior and subordinate loans on transitional commercial real estate assets located in major markets across the U.S.
Earlier Tuesday, a JPMorgan analyst downgraded Claros Mortgage Trust from neutral to underweight with a price target of $17 per share. During the second quarter of 2022, loan origination activity was $1 billion of total loan commitments across eight investments, compared to $1.8 billion in total loan commitments across eight investments in the fourth quarter of 2021.
Go To: This High-Yielding Dividend REIT Is Downgraded, As 2 Year Treasury Yield Outpaces Average Corporate Dividend Yield
Apollo Commercial Real Estate Finance Inc (NYSE:ARI) is offering a dividend yield of 12.40% or $1.40 per share annually, making quarterly payments, with an inconsistent track record of increasing its dividends. Apollo Commercial Real Estate is a real estate investment trust that primarily originates, invests in, acquires, and manages commercial first-mortgage loans, subordinate financings, commercial mortgage-backed securities, and other real estate-related debt investments.
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.