Why REIT Dividends are a Game Changer for Investors
Dividends can be an incredible way to create passive income by investing in the stock market. While many investors focus on traditional dividend stocks, real estate investment trusts, commonly referred to as REITs, can be an excellent source for reliable dividends because of their unique structure. If you're looking for ways to diversify your portfolio into real estate or possibly grow your dividend income, here's why REIT dividends are a game-changer for investors.
REITs have strict requirements to follow to benefit from some of the tax advantages of this classification, such as paying zero corporate tax. Specifically, REITs avoid double taxation on earnings, unlike standard non-REIT corporations, by not requiring to pay income taxes at the corporate level. Instead, taxes are only paid at the shareholder level on dividends received.
Some of the requirements for REITs include having at minimum 75% of its assets in real estate or real estate-related securities, such as mortgages or real property. REITs also must earn at least three-fourths of their income from real estate through things like rental income or mortgage income. But most importantly, REITs are required to pay at least 90% of their taxable income to shareholders in the form of a dividend.
Source Fool.com
