Deep Dive: March Madness for REITs? Here’s a ‘final four’ for investors seeking dividend income.

by | Mar 17, 2023 | Stock Market

“Final four” is an eye-popping term, and will signal maximum excitement for fans of the NCAA Men’s Division 1 Basketball Tournament, when we see which teams win games among the “elite eight” on March 26. But if you are an income-seeking investor who doesn’t want to risk dividend cuts during a long period of market turmoil that might be followed by a recession, a team of analysts at Jefferies led by Jonathan Petersen has already narrowed down a group of 76 publicly traded real-estate investment trusts to its own “final four.” These are companies with good records for increasing payouts that Petersen expects to continue doing so over the next three years.

A REIT is a company that owns property or invests in mortgage-backed securities and distributes at least 90% of its earnings to shareholders as dividends, in return for tax advantages. Most dividends received by investors are taxed as ordinary income. There are two broad types of REITs. An equity REIT holds property and rents it out. A mortgage REIT either operates as a lender, or invests in mortgage-backed securities, or both.Narrowing an “elite eight” of REITs to the “final four” In a report on March 17, Peterson wrote that among 76 publicly traded U.S. REITs that have existed for at least 15 years, only 22 have been able to avoid cutting their dividends. He noted that “the list of stalwart dividend payers isn’t heav …

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