Disclaimer: All information on this section is of a general nature.
Before making any investment decision, you should seek the relevant advice.
Market Watch February 2018
REITs typically pay out a significant portion of their income to
unitholders and must have the majority of total assets in real estate to be considered and listed as a REIT.
A key advantage as compared to stocks is predictable cash flow and dividends. Because REITs are required
to give out most of their income as dividends, investors should be fairly certain of consistently getting
dividends - as long, of course, as the REIT continues to be profitable.REITs also tend to sign long-term
leases with their tenants. Because of this, investors are able to predict the long-term revenue of a REIT
accurately. A key disadvantage as compared to stocks is the degree of leverage. Leveraging allows REITs
to purchase more assets than they have in unitholders’ equity. At the same time, leverage poses additional
risks as REITs may face difficulty paying off its debt in difficult times. The fact that REITs are required to
pay out a significant portion of their income to unitholders works as a double-edged sword too. Although
unit holders can sleep easy knowing they can earn consistent dividends, REITs are not able to reinvest in
their portfolio, hence can remain stagnant for many years.