Real Estate Investment Trusts (REITs) are a unique and transparent way of investing in real estate. REITs own, manage or finance any kind of properties. Under SEC guidelines, REITs must pay out 90% of their taxable income to shareholders in dividends, which makes them a great alternative for income investors. They’re also a good inflation hedge.
During the most inflationary 8-years period in U.S. history (1974-1981), the consumer price index rose at 9.3%. According to Forbes, after adjusting for inflation, REITs produced 7% total returns, while the S&P 500 delivered just 0.8%. Their overall yields are superior and put them ahead of the S&P 500 in all inflation periods. In all years from 1998 to 2018, with the exception of 2009 during the financial crisis, REIT dividend growth alone was more than enough to offset rises in the consumer price index. REITs are an excellent investment for any long-term investor who wants to get ahead of rising prices.
Sven Franssen