Need to Know: REITs

In this episode of Need to Know, our series covering the topics and issues influencing markets and the global conversation, Lindsay Dutch, Senior Equity Research Analyst at Bloomberg Intelligence, defines Real Estate Investment Trusts (REITs) and explores the asset class’s role in the market and within portfolios.

“REITs offer diversification to a traditional investment portfolio because their returns are not necessarily correlated with the broader moves in the market,” she explains. “REITs are also very well known for their dividends. REITs are required to pay out 90% of their taxable income in the form of a dividend, but most of them actually pay out a hundred percent. So this dividend and the underlying value of the properties that these REITs own is really what ties the performance to interest rates. When interest rates come down, REIT stock prices typically move higher, and that’s because their dividends and theoretically the property value that they own is moving higher and it’s becoming more valuable.”