Dividend investing is a method of buying stocks of companies that had declared regular cash payouts to shareholders as a reward for holding on to the stock. It can provide a stable income stream to shareholders in addition to the potential capital appreciation. In this regard, Real Estate Investment Trust (REIT) became a popular option for investors considering that it is mandated by law to declare at least 90% of its distributable income as dividends to shareholders in which the dividends should be payable from the unrestricted retained earnings. This is the reason why we commend the lawmakers and the regulators for amending the implementing rules and regulations of the REIT Act of 2009 related to the minimum public ownership requirement from a maximum of 67% to a minimum of 33% of the outstanding capital stock. These amendments persuaded most real estate companies to establish a REIT as a separate subsidiary for the purpose of consolidating its income-generating real estate. But the House Bill 7525 proposes to amend the REIT Act of 2009 that would require the REIT sponsor or promoter to reinvest in the Philippines the proceeds realized from the sale of REIT shares within one year from the date of receipt. Proceeds subject to the reinvestment rule include other securities issued in exchange for income-generating real estate and other proceeds raised from the sale of income-generating real estate that are transferred to the REIT. REIT is required to submit a reinvestment plan to the Philippine Stock Exchange and Securities and Exchange Commission upon registration and should secure an annual certification to demonstrate its compliance with the reinvestment plan. Although the proposed amendments could be beneficial to real estate sector, we should remember that a reinvestment plan should be anchored on a common policy rather than an uncommon strategy. A reinvestment plan provides a platform from which change could be leveraged to minimize the risk and maximize the return so it should be flexible and adaptable enough to manage adjustments to serve the interest of the shareholders. Perhaps the proposed amendments should consider the fact that REIT needs more than one year to reinvest in the Philippines the proceeds realized from the sale of REIT shares from the date of receipt. Any business undertaking goes through the usual process of economic expansion and contraction so we should not propose an order that would limit the flexibility and adaptability of a reinvestment plan.
