The mall real estate investment trust (REIT) sector got hit hard by the coronavirus pandemic. Even companies like Macerich (NYSE: MAC) that own malls in good locations weren't spared. As the world looks to move past COVID-19 with new vaccines, is now the time to buy this mall REIT, which yields almost 5%? Read this before you do.
Where 5% falls
When you look at the mall REIT sector, there are basically just three companies that still pay dividends: Macerich, with its 4.9% yield; factory outlet center specialist Tanger Factory Outlet Centers at 4.4%; and industry giant Simon Property Group, at 4.5%. By comparison, the S&P 500 Index yields roughly 1.5%, and the average REIT, using the Vanguard Real Estate Index ETF as a proxy, yields 3.8%.
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In 2020, when governments around the world closed non-essential businesses in an attempt to slow the spread of the coronavirus, Macerich cut its dividend twice. In the second quarter, it took the dividend from $0.75 per share to $0.50, with a portion paid in stock. Then in the third quarter, it went to an all-cash dividend of $0.15 per share, for a total reduction of 80%.
Macerich's rivals didn't fare any better. Tanger suspended its dividend altogether in Q3 until bringing it back at half its previous level in early 2021. Simon delayed its second-quarter dividend in 2020, but eventually paid it at about 40% below the first-quarter dividend. Others left investors in even worse shape -- CBL & Associates and Penn REIT ended up filing for bankruptcy.