Capital Preservation for Value Investor

[Temperament]

Those who blindly bought REITs and shipping trusts on the basis of passive income learnt this the hard way when many REITs destroyed value via rights issues, and many shipping trusts cut or even suspended their distributions.

As usual, YMMV.

Thanks d.o.g. for the insightful post.

I was one of those who had REITs during the 08 GFC and the massive rights issues.

One thing I want to clarify is how do rights issues destroy value? I know they dilute the earnings over a larger number of shares, but when they issue rights at low prices and I subscribe to the rights, in the end my returns (yield) is still around 6% on total investment (initial investment + rights subscription). Compared with about 6% also before the rights issue. Am I missing something?

Sorry for the noob question, I'm not financially trained.

If you are a retiree, I am sure that you would feel different because it is difficult for you to subscribe the rights.

No! i always love "Rights Issue". It's an opportunity for you to find out whether you should subscribe or not. Or even buy the "NIL PAID RIGHTS" if you think you can make money in the long run. I think it's better than buying "IPO" most of the times.