What you can own
REIT
Also called Real estate investment trust
A listed company owning income-producing property, required to pay out most of its profits.
How it works
REITs receive favourable tax treatment in exchange for distributing the large majority of taxable income to shareholders, which is why yields are typically high.
They give exposure to property with the liquidity of a listed share, and with the price volatility of one too.
Where it misleads people
Because REITs must distribute most earnings, they cannot retain much to fund growth and so raise capital frequently. They are also highly sensitive to interest rates, being both indebted and valued as income streams.
Related terms
- Dividend yieldAnnual dividends per share as a percentage of the share price.
- DurationHow much a bond’s price moves when interest rates change, expressed in years.
- Funds from operationsA property-company profit measure that adds back depreciation, since buildings often appreciate.
- LeverageUsing borrowed money to increase exposure beyond what your own capital would buy.
More in What you can own
All 10 What you can own terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.