A company that owns, operates, or finances income-producing real estate and distributes at least 90% of taxable income to shareholders as dividends.
REITs allow individual investors to invest in large-scale real estate without directly buying property. They trade on major exchanges like stocks and come in various types: equity REITs (own properties), mortgage REITs (finance properties), and hybrid REITs (both). Sectors include residential, commercial, industrial, healthcare, and data centers. Because REITs must distribute 90% of income, they typically offer attractive dividend yields of 3-6%. REIT dividends are generally taxed as ordinary income rather than at the lower qualified dividend rate. REITs provide portfolio diversification because real estate has moderate correlation with stocks.