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Are REITs a Gamble These Days?

Aaron Levitt Dec 31, 2020

It’s no secret that the pandemic has upended the economy. Thanks to the various work from home orders, quarantining, and overall clampdown, COVID-19 has affected all segments of the market. A variety of sectors and industries have suffered. But some have suffered more than others. Chiefly within that camp are real estate investment trusts (REITs).

Offering regular Joes a chance to own commercial real estate assets, REITs have long been prized by income seekers. Thanks to their tax structure, REITs are forced to kick out much of their cash flows back to investors as dividends. This results in higher-than-average yields.

However, thanks to the coronavirus, many REITs have suffered. Store closures, bankruptcies, rental discounts, and other issues have weighed heavily on the sector, decreasing cash flows and dividends. This has hurt their share prices as well.

The question now is whether or not REITs represent a bargain going forward. The answer may not be so simple. There’s still a lot of risk for the sector.

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