As of May 2015, high-dividend REITs include Resource Capital Corp., New York Mortgage Trust, ARMOUR Residential REIT Incorporated and Chimera Investment Corp, reports Investopedia. These REITs had dividend yields, respectively, of 14.80 percent, 13.90 percent, 15.60 percent and 12.80 percent.Continue Reading
In many cases, REITs have a high dividend yield because their share price is falling, signalling potential problems, cautions Investopedia. The most frequent causes of declining share price, and therefore rising dividend yield, include accumulation of debt and reduced profits. Although high-dividend REITs may produce good short-term results, they may also lead to significant loss of capital as the share price plummets.
Although REITs pay a very high rate of return compared to other securities, they have many disadvantages, mainly relating to taxation, notes Investopedia. Roughly 75 percent of REIT income is taxed as ordinary income, which is taxed more heavily than capital gains. REIT income is taxed at a rate that is approximately 15 percent higher than the majority of dividends. As property taxes are a significant part of operating expenses for REITs, the cash available for dividend payouts may be reduced. A REIT may also lose REIT status due to one of many factors, including the proportion of its assets classified as real estate, the proportion of its income from real estate-based sources and the number of its shareholders. As a rule, REITs do not offer any capital appreciation.Learn more about Investing