What happened

Mall REIT CBL & Associates (NYSE:CBL) reported its second-quarter earnings on Wednesday evening, and the results weren't pretty. As of 3 p.m. EDT on Thursday, the stock has fallen by more than 11%.

The company's funds from operations (FFO, the REIT version of earnings) declined by 8% year over year, and same-center net operating income (NOI) dropped by nearly 7%. Occupancy was down by 50 basis points as well.

Shopper holding bags, walking toward mall entrance.

Image source: Getty Images.

However, nobody expected CBL's results to be particularly strong. In fact, the company's FFO and revenue beat estimates. CBL operates a portfolio of Class B and C malls, the majority of which are anchored by troubled department store tenants. In other words, not the best property portfolio to own in the current retail environment.

So what

The real reason for the drop is concerns about the future. While the company reports that it is making good progress on its redevelopment initiatives and portfolio repositioning, there are financial concerns weighing on the stock.

Specifically, CEO Stephen Lebovitz mentioned the possibility of a dividend cut later this year. CBL already slashed its dividend by 25% last year, and a further dividend cut could cause investors to run for the exits. After all, the company's roughly 15% dividend yield is likely a major reason many income investors are sticking with CBL right now.

Additionally, the mention of a dividend cut gives investors reason to believe that CBL could run into trouble paying its debt obligations in the not-too-distant future, which could be disastrous for the stock.

Now what

CBL's property-enhancement strategy seems to be moving along as expected, but the company's rather high debt load remains a major concern. CBL has made strengthening its balance sheet a priority, but it's uncertain whether the company will be able to do so fast enough to avoid a dividend cut or worse.