Financial Benefits of REITs

REITs offer investors the benefits of real estate investment along with the ease and advantages of investing in publicly traded stock. REITs have historically provided investors dividend-based income, competitive market performance, transparency, liquidity, inflation protection and portfolio diversification.

Liquidity
REITs have historically provided:
  • Ability to buy/sell like other stocks, mutual funds and ETFs.
  • Opportunities for tactical asset allocation.
  • Easy portfolio rebalancing.
Diversification
REITs have historically provided:
  • Low correlation with other stocks and bonds.
  • Higher risk-adjusted returns.
  • An investment in real, tangible assets.
Transparency
REITs have historically provided:
  • Corporate governance aligned with shareholders interests.
  • Audited financial reports.
Dividends
REITs have historically provided:
  • Dividends & wealth accumulation.
  • Regular income from rents.
  • Reduced portfolio volatility.
Performance
REITs have historically provided:
  • Total returns above the S&P 500 over the past 25 years.
  • Higher returns than corporate bonds.

REITs offer investors the benefits of commercial real estate investment along with the advantages of investing in a publicly traded stock. The investment characteristics of income-producing real estate has provided REIT investors with historically competitive long-term rates of return that complement the returns from other stocks and from bonds.

REITs are required to distribute at least 90 percent of their taxable income to shareholders annually in the form of dividends. Significantly higher on average than other equities, the industry's dividend yields historically have produced a steady stream of income through a variety of market conditions.

In addition to the historical investment performance and portfolio diversification benefits available from investing in REITs , REITs offer several advantages typically not found in companies across other industries. These benefits are part of the reason that REITs have become increasingly popular with investors over the past several decades.

REITs' reliable income is derived from rents paid to the owners of commercial properties whose tenants often sign leases for long periods of time, or from interest payments from the financing of those properties.

Most REITs operate along a straightforward and easily understandable business model: By leasing space and collecting rent on its real estate, the company generates income which is then paid out to shareholders in the form of dividends. When reporting financial results, REITs, like other public companies, must report earnings per share based on net income as defined by generally accepted accounting principles (GAAP).

In short, REITs over time have demonstrated a historical track record providing a high level of current income combined with long-term share price appreciation, inflation protection, and prudent diversification for investors across the age and investment style spectrums.