CBL's 17% Dividend Yield And What Investors Should Make Of It

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  • The market is putting an extremely low valuation on CBL’s shares right now.
  • This has made the dividend yield as well as the cash flow yield rise significantly over the last quarters.
  • Due to management’s approach more dividend cuts could be coming even though CBL continues to generate a high amount of cash flows.

By Jonathan Weber for Sure Dividend

CBL & Associates Properties (CBL) currently offers a very high 17% dividend yield to investors, but the future of the REIT is highly doubtful. There are not many securities with yields near that of CBL's. You can see the full list of all 402 securities with 5%+ yields here.

In this article I will lay out why I believe that CBL may not be a good choice for conservative income focused investors. For adventurous investors CBL offers some chances though, as the valuation the REIT is trading at is extremely low.

Company Overview

CBL, which was founded more than 50 years ago, owns a large portfolio of grade B malls and other real estate assets that it operates throughout the US.

Source: (CBL's 10-K filing)

Despite the struggles in the mall industry CBL's performance through 2016 has not been bad at all:

Source: (CBL's 10-K filing)

CBL had managed to grow its sales per square foot whilst at the same time reducing its debt levels significantly.

Retail trends such as shoppers moving from malls to online shopping avenues has hurt brick and mortar retailers in the recent future, and has had an impact on retail REITs as well:

Source: ^DJUSRL data by YCharts

Over the last three years the Dow Jones Retail REIT index is down 25%, but CBL's performance has been significantly worse over the same time frame; Shares dropped by more than 75%.

CBL Looks Like It Is Priced For Bankruptcy

This deep decline in CBL's share price has brought down the REIT's valuation, and it currently looks like the market is pricing CBL as if it would go bankrupt in a couple of years.

Source: CBL Price to Book Value data by YCharts

CBL trades at 0.7 times book value right

This article was written by

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Sure Dividend helps individual investors find high quality dividend growth stocks with strong competitive advantages suitable for long-term holding. The authors who write for Sure Dividend on Seeking Alpha are as follows:Bob CiuraBen ReynoldsJosh Arnold

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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