Since the recession and the Fed’s zero interest rate policy (ZIRP) strategies, real estate investment trusts (REITs) have garnered a lot of attention from investors. And there’s good reason for this newfound love affair with REITs: They pay high dividends. Thanks to their corporate tax structures, REITs kick out much of their cash flow back to investors via juicy payouts. It’s not uncommon to find an REIT yielding in the 3% to 6% range.
In the world of ZIRP, that sort of high yield was seen as a godsend. And investors of all stripes dove in head first.
But they may want to keep swimming into the deeper end of the REIT pool. According to some new research, REITs perform a much bigger role in our portfolios than just for income and we should own a lot more of them.
Come for the Dividend, Stay for the Total Returns
To be honest, most investors own REITs the wrong way. Like their big yielding sisters – master limited partnerships (MLPs) – the focus has been strictly on the amount of cash they pay out. And that’s understandable when getting a decent income from your portfolio is almost impossible when the Fed keeps rates at 0.25%.