- REITs must, by law, distribute at least 90 percent of their profits to shareholders. This means that you are guaranteed to get a dividend from a REIT if it is profitable. In addition to this, the dividend yield may be higher than other dividend stocks because it is required to return 90 percent of its profits to shareholders. This means that more money is guaranteed to be returned to you than if you invested in another dividend-paying company, all other things being equal.
- Real estate may be a stable sector over the long term. This is especially true if the investments in the REIT are long-term leases by companies. Large companies that pay their bills and are financially stable represent a good risk for the REIT. Additionally, REITs that invest in mortgages guaranteed by the government also represent a good risk for investors.
- REITs may allow you to participate in a direct investment plan. With this type of plan, you buy the stock directly from the company. When the company pays a dividend, those dividends are reinvested into the REIT automatically. This, in turn, grows your investment. Even if the stock price falls slightly, your reinvestment could mean a net gain for you in your investment over time. This is because those dividends go to buy additional shares of stock that then pay dividends.
- You get indirect exposure to real estate. If you want to invest in real estate, but you don't want to become a landlord, you can invest in a REIT and get some of the benefits of investing in real estate. You get a company to manage the properties for you and deal with all of the headaches. You retain 90 percent of the profits of the company proportional to your share in the company.
- Advertisement -
- Advertisement -