REITs, or real estate investment trusts, have a reputation for income and consistent payouts. By law, these companies pay out 90% of their taxable income as dividends, making them a, shall we say, interesting alternative to your run-of-the-mill Dividend Kings and Aristocrats. Some REITs belong to both lists. With such high dividend yields—reaching double-digit percentages in some cases—prudent investors might wonder: what's the catch?
Several factors influence REIT stocks, including macroeconomic factors, real estate or equity market volatility, declining property values, and overexposure to certain property types or trends. Between March 2022 and July 2023, however, higher interest rates were the biggest driver of REITs underperformance. Indeed, higher-for-longer interest rates could certainly affect a company's bottom line.
