Source: Nareit | Repost Serenity Alt 2/16/19
REITs historically have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation. Their comparatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns. These are the characteristics of real estate investment.
REITs are total return investments. They typically provide high dividends plus the potential for moderate, long-term capital appreciation. Long-term total returns of REIT stocks tend to be similar to those of value stocks and more than the returns of lower risk bonds.
Because of the strong dividend income REITs provide, they are an important investment both for retirement savers and for retirees who require a continuing income stream to meet their living expenses. REITs dividends are substantial because they are required to distribute at least 90 percent of their taxable income to their shareholders annually.
Their dividends are fueled by the stable stream of contractual rents paid by the tenants of their properties. The relatively low correlation of listed REIT stock returns with the returns of other equities and fixed-income investments also makes REITs a good portfolio diversifier. REIT returns tend to “zig” when those of other investments “zag,” helping to reduce a portfolio’s overall volatility and improve its returns for a given level of risk.