Income investors should be well familiar with real estate investment trusts or REITs. For context, REITs are structured differently from public corporations, don’t have to pay the typical corporate income taxes, and must pay shareholders 90% of their taxable income. With those kinds of numbers, it's no surprise that REITs offer some of the highest yields on the market.
Yet, not every stock that says “real estate investment trust” should be trusted. Some REITs are better than others. Some go to zero, leaving investors with no choice but to sell their shares at pennies to the dollar. That’s why finding ones that offer stability, attractive returns, and high yields should be prioritized.
