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CHICAGO-Equity Office Properties Trust slashed its dividend by one-third Wednesday, expecting lower taxable income in 2006. The largest US office REIT also says funds from operation are expected to be in the range of $2.15 to $2.30 per share.

While the company's trustees have approved buying back another $500 million worth of Equity Office Properties common stock, Wall Street was less enthusiastic, as the stock price dove nearly 5%. Since launching the share buyback program in 2002, the REIT has spent $865 million repurchasing stock and operating partnership units. However, while yielding 6.4% based on Wednesday morning's stock price, Equity Office Properties Trust's decision to lower the dividend to $1.32 per share will reduce that yield to about 4.2%.

"The reduction of the dividend was a decision that was clearly not taken lightly," said chairman Sam Zell during his company's conference call. "I have spoken of the importance of maintaining the dividend in the past. Reducing the dividend is the right thing to do at this time given the reshaping of Equity Office over the past two years and our plans for the future."