In the quest for higher income potential, the U.S. market’s average dividend yield often falls short for some investors’ needs.
For example, the iShares Core S&P Total U.S. Stock Market ETF (ticker: ITOT) only offers a modest 30-day SEC yield of 1.4%. In light of this, REITs, or real estate investment trusts, are often sought after as an alternative for their higher yield potential.
“REITs are companies that own, operate or finance income-generating real estate properties,” says Rohan Reddy, director of research at Global X ETFs, which operates the Global X SuperDividend REIT ETF (SRET). “They are required to distribute at least 90% of their taxable income as dividends to shareholders, which makes them a popular choice for investors seeking regular income.”
By owning REITs, investors can obtain real estate exposure within a regular brokerage account, benefiting from consistent income without the need for a down payment, mortgage or property taxes.
“REITs are currently paying a dividend that is nearly three times the dividend on the S&P 500 – plus the potential for capital appreciation,” says Abby McCarthy, senior vice president of investment affairs at Nareit.
