REITs stands for Real Estate Investment Trusts. Investors of all ages, in the U.S. and worldwide, invest in REITs directly or indirectly through mutual funds.
Investors looking to start their so-called ‘dividend investing journey’ inevitably look towards REITs because of their relatively high levels of distributable income a.k.a dividend yields.
The business of REITs, to put it simply, is a trust that invests in commercial properties (hotels, offices, retail spaces etc), which are then rented to tenants.
The tenants will pay for the rental, which then becomes cash flow to the REIT; of which a sizeable amount of that cash flow will be distributed to the REIT’s unitholders.
In an ideal scenario, the REIT you have invested in grows steadily, their underlying properties becomes valuable to the tenants, and over time, rental fees increase, as does your dividend pay-out.
But as we know, in reality, especially for business and investing, things are usually not …