Diversification is probably one of the most important things for investors of any kind. Many people choose to diversify their portfolio with real estate but that comes with a lot of specific issues. An interesting alternative is Real Estate Investment Trusts (REIT), which can help alleviate the disadvantages of investing in physical real estate and provide a high yield (often payable monthly).
Keys points about REITs
- They offer a higher yield than most of the dividend stocks
- Their prices fluctuate differently than stocks
- They have to pay 90 % of their income via dividends
- Their income comes mostly from passive rent leases
REITs Pitfalls
- There is usually not very great price growth
- As Interest rates rise some REITs can lose value (it also works oppositely)
- Everything that affects rents is a risk factor: Trends, moving into big cities, a slower economy
What to focus on when comes to REITs
- Management of the company
- Portfolio of real estate assets
- Dividend history
- Debt level
- Volatility (lower the better)
We would not recommend creating a solely REIT portfolio or use these funds as the only means of investing, but REITs can be used as a great tool for diversification and an easy start to real estate investing for people who don’t want to or cannot buy physical real-estate.
You can also add (multiple) REITs to our dividend calculator! You weighted average dividend yield and estimated returns. We created a list of all public tradeable REITs where you can explore more than 200 Real Estate Investment Trusts listed on NYSE and NASDAQ.
Some of the bigger and popular REITs are:
American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of approximately 181,000 communications sites.
Simon is a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment and mixed-use destinations and an S&P 100 company (Simon Property Group, NYSE: SPG).
Welltower Inc. is an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The Company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate infrastructure needed to scale innovative care delivery models and improve people's wellness and overall health care experience. Welltower?, a real estate investment trust (REIT), owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties.
Equity Residential is committed to creating communities where people thrive. The Company, a member of the S&P 500, is focused on the acquisition, development and management of residential properties located in and around dynamic cities that attract high quality long-term renters.
Realty Income, The Monthly Dividend Company, is an S&P 500 company dedicated to providing stockholders with dependable monthly income. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with our commercial clients.
