Corporate Office Properties… From Woes To Wins? (OFC)

Corporate Office Properties Trust (NYSE: OFC) may be even worse than some investors have feared.  After an incredibly poor performance in 2011, the commercial office real estate investment trust is going from what is a high dividend yield to a much lower yield.  The prior yield was around 7%, and the new yield is closer to 4.8%.  This may sound great when compared to a 2% rate for a ten-year Treasury note, but this is after this REIT lost about one-third of its value in 2011.

Maybe this gives the REIT some better flexibility to sell off underperforming assets to shape up its balance sheet without additional dividend cuts.  That sounds a bit like hope and we maintain that hope is a poor primary business strategy.  This comes while it still aims to grow its office space in the areas surrounding Washington D.C.

The company’s guidance of $2.02 to $2.18 FFO for all of 2012 implies that the dividend yield cannot simply return higher in a short period of time.  Unfortunately, not all REITs have a place in the model dividend portfolio.  It is interesting that the REIT rose 6% on what looked and felt like such bad news.  Maybe the realization is that losing one-third of the value was too much of a drop even considering this situation’s negative tone.