Real estate investment trusts (REITs) buy a lot of properties, lease them out, and split the rental income with their investors. U.S. REITs are also required to pay out at least 90% of their taxable income as dividends to maintain a favorable tax rate.

That simple business model usually makes REITs a sound investment for most income investors, but rising interest rates weighed down the sector for two reasons. First, higher rates made it more expensive to purchase new properties. Second, REITs lost their luster as income plays as the yields of risk-free CDs and T-bills soared above 5%.

Image source: Getty Images.

Continue reading

Source Fool.com