Real Estate Investment Trust - Definition

REIT is the common acronym for a Real Estate Investment Trust. A REIT is a specialized form of company that effectively allows its (usually public) investors to share the ownership of a group of real estate properties. REITs generally pay no federal income tax but are subject to a number of special requirements set forth in the Internal Revenue Code, one of which is the requirement to annually distribute at least 90% of its taxable income in the form of dividends to its shareholders. In practice, many REITs distribute substantially all of their current earnings and more, often resulting in dividend yields comparable to bond yields. This distribution requirement hampers a REIT's ability to retain earnings and generate growth from internal resources. This and other restrictions imposed by the Code generally limit a REIT's suitability for growth-oriented investors, but investors would be well-advised to fully consider a REIT's upside (or downside) potential for changes in its stock price, which can be very sensitive to environmental factors (e.g. changes in prevailing interest rates).

REITs

• The Link REIT

External links

• National Association of Real Estate Trusts (http://www.nareit.com)