REITs’ reliable income returns have been one of the chief drivers in the industry’s performance. In 2013, for example, REITs paid investors approximately $34 billion in dividends.
In order to pay no corporate income tax, U.S. REITs must pay out all of their taxable income to their shareholders in the form of dividends. Consequently, REITs tend to generate a stable and consistent income stream for investors.
While REIT stocks have exhibited clear potential for strong price appreciation, price returns can fluctuate from year to year. From 1974 through 2014, stock exchange-listed Equity REITs have yielded a consistent annual income component of 6.7 percent, representing approximately 47 percent of the industry’s average annual total return of approximately 14.1 percent. By contrast, the S&P 500 yielded an annual income component of 2.8 percent during that period, representing approximately 23 percent of the industry’s average annual total return of approximately 12.2 percent.