Dividends4Life: US Credit Rating Downgrade: A Danger to REIT Dividends

With S&P warning there is 50-50 chance of a downgrade to the US' Credit Rating, investors are looking for safe havens. Traditionally, high yielding REITs garner attention due to their reliable income. However recent reports warn that a downgrade to US government debt could have a sizeable impact on REIT earnings -- and their dividends.

Several mortgage REITs are trading close to 52 week lows at the moment as analysts consider these companies at risk from the potential downgrade of US government debt. Agency Mortgage REITs such as American Capital Agency have portfolios made up principally of mortgages insured by the federal agencies Fannie Mae, Freddie Mac and Ginnie Mae. A downgrade in US debt would make paper from these federal agencies suffer a downgrade along with most other government-related bonds.

Source: Market Watch

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