REITs vs. Dividend Stocks: What's a Better Investment?
Investing in dividend stocks is a great way to build wealth over the long term. However, income investors often face a tough choice: Should they invest in real estate investment trusts (REITs), which often offer high yields but less capital appreciation, or traditional dividend stocks, which pay lower yields but have more growth potential?
REITs operate a simple business model. They purchase properties, rent them out, and split the rental income with their investors. They are required to pay out at least 90% of their taxable income as dividends to their investors.
Most REITs fall into either one of two categories: gross lease and net lease. The gross lease REITs offer all-inclusive rental agreements, in which the landlord pays most of the operating expenses (taxes, insurance, and utilities) associated with the property. Net lease REITs charge lower rent but don't cover the operating expenses.
Source Fool.com
