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No. of Recommendations: 10
In the 2008-09 meltdown and immediate aftermath years, many, many REIT common dividends were cut. Some have yet to regain their former levels. No well-known equity REITs missed a dividend on its preferred that I can recall. PLD dividend just regained its 2008 level, for example. WRE cut its dividend in 2012 and has yet to bring it back up. KIM cut its common dividend and it has not regained its pre-meltdown level.

Please also recall that REITs are required to pay out 90% of their tax-basis net income in dividends to continue the benefits of REIT status. So, the board has less freedom to go divvy-free for an extended period than it would with a C corp.

Yes, it's no protection in bankruptcy. But how many major REITs have we seen go bankrupt? We've seen many cut their common dividends. Can't think of one that has cut or skipped a preferred dividend.

This article looks at what would have happened to you if you were dependent on REIT common dividends in the 2008 recession and its aftermath. I only skimmed it, but for his list of REITs (and I don't know how he chose the list but it was pretty 24 well-known names, diversified across sectors) half of the REITs cut their common dividends. His portfolio income fell 26% and did not fully recover until 2013.

Some of the companies cutting dividends were considered "bluest of the blue chip REITs" by this board.

So, that's the reason to have an allocation to preferred stocks -- safety.

I only get one retirement. Even a 10% chance of running out of money is unacceptable to me. If I had 10 retirements, and could say while living in poverty "Yeah, this sucks, but in my other 9 retirements I am comfortable," I might be cool with "probably" everything will work out. But I only get 1, and if the one I get is the one where I run out of money, that will be 100% of my retirements.

For this reason, I have an allocation to GNMAs, an allocation to preferreds, an allocation to long bonds, an allocation to insured mutual funds,* and an allocation to common stocks. Plus an annuity that kicks in when and if I reach 85.

I give up a lot of return for the sake of safety. But what this return foregone buys me is priceless: Financial peace of mind.

*Mutual funds with an insurance wrapper that says even if the fund goes to zero due to market reverses and my steady withdrawals, the insurance company will keep paying me and my wife a lifetime income equal to a certain percentage of the accounts peak value. My allocation to this bucket is 33%, spread across 5 insurance companies, none of which is the same as the one who issued my deferred annuity nor the same as the one carrying our long-term-care insurance.
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