Elective Stock Dividends and REITs: Evidence from REIT Dividend Policy during the Financial Crisis

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Desmond Tsang & Erik Devos & Andrew Spieler, 2010. "Elective Stock Dividends And Reits: Evidence From Reit Dividend Policy During The Financial Crisis," ERES eres2010_201, European Real Estate Society (ERES).


In response to the recent financial crisis, the U.S. Government introduced new rules which allow REITs to issue elective stock dividends (ESD) to satisfy their distribution requirements. The goal of these rules was to provide temporary relief to REITs facing cash flow problems. We investigate how the introduction of these rules affected dividend policy of REITs. Surprisingly, we document that only 17 REITs chose to issue elective stock dividends. We examine the characteristics of these REITs and find that their cash flows are similar to REITs who did not select these dividends. This suggests that REITs cash flow problems are unlikely to be a determinant of the elective stock dividend issuance decision. Instead, our findings indicate that the choice to pay elective stock dividends is related to the level of loans that are close to maturity, REIT size, growth opportunities, and poor performance during financial crisis.