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REITs — Real Estate Investment Trusts Explained

Overview

REITs let you invest in real estate without buying property. They're required to distribute 90%+ of taxable income as dividends, making them one of the highest-yielding equity categories. Discover how REIT yield stacks up against traditional equities in the stock market section, and explore other non-stock options in alternative investments. For sector-specific picks, continue to Top REIT Sectors for Dividend Income.

Key Takeaways

  • REITs own and operate income-producing real estate (offices, apartments, data centres, malls).
  • By law, REITs must distribute at least 90% of taxable income as dividends.
  • REIT dividends are typically ordinary income — less tax-efficient than qualified dividends.
  • Equity REITs own property; Mortgage REITs (mREITs) invest in mortgage-backed securities.

Practical Tips

  • Diversify across REIT sectors: industrial, residential, data centre, healthcare, retail.
  • Use Funds From Operations (FFO) instead of earnings to value REITs — P/FFO replaces P/E.
  • Hold REITs in tax-advantaged accounts (IRA, 401k) due to ordinary dividend taxation.

More REITs Guides

Top REIT Sectors for Dividend Income

Not all REITs are created equal. Learn which REIT sectors offer the best combination of yield, growth, and defensiveness for building reliable dividend income streams. Compare individual REITs in the <a href="/tools/screener" class="text-primary hover:underline">stock screener</a> and evaluate their financials through our <a href="/academy/fundamental-analysis" class="text-primary hover:underline">fundamental analysis</a> guides. If you're new to real estate investing, start with <a href="/academy/dividends/reits-explained" class="text-primary hover:underline">REITs Explained</a> for the essentials.

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