What Is a REIT?
A REIT, or real estate investment trust, is a company that owns property like offices, warehouses or apartments. Buying its shares lets you invest in real estate without buying a building.
How REITs make money
Most REITs collect rent from tenants. Some lend money for property instead. The rent, minus costs, flows back to shareholders.
Why REITs pay high dividends
In the US, a REIT must pay out at least 90% of its taxable income as dividends to avoid most company taxes. That is why REIT dividend yields are often higher than normal stocks.
Risks to know
REITs often borrow a lot, so rising interest rates can hurt them. Some property types fall out of favor, like offices when people work from home. REIT dividends are usually taxed as normal income in the US.
See it in real companies
Open a company to see what it sells and how it makes money.