Safety Read: Sector-dependent
REITs, real estate investment trusts, own income-producing property (apartments, warehouses, data centers, malls) and are among the most popular income investments. Understanding why they yield so much explains both their appeal and their risks.
Why REIT yields are high
By law, REITs must distribute the large majority of their taxable income to shareholders. That mandate is what produces those attractive yields, it’s structural, not a sign of distress.
The risks that come with it
- Interest rates: REITs often fall when rates rise, because they borrow heavily and compete with bonds for income investors.
- Sector matters: data-center and industrial REITs behave very differently from mall or office REITs.
- Payout metric: judge REIT dividends against FFO (funds from operations), not standard earnings.
How to use them
REITs can be a powerful income sleeve, many pay monthly, but size the position for the volatility and check payout coverage on FFO. See our safety framework.
This is educational analysis, not personalized investment advice. Always do your own research.