Dividend yield is the ratio of dividends paid per share to the stock price. Focusing solely on the dividend yield when it comes to Real Estate Investment Trusts (REITs) may not be the best approach for several reasons:

The dividend yield can fluctuate: REITs are subject to fluctuations in interest rates, economic conditions, and the overall performance of the real estate market and stock market. Dividend yields can fluctuate daily as a result and it is important to assess whether a lower dividend yield actually translates to lower quarterly dividends received. A lower yield could have happened because the stock price increased – and that is not a bad thing!

Dividend yield does not reflect the overall performance of the REIT: While a high dividend yield may be attractive, it does not necessarily reflect the overall performance of the REIT. A REIT with a high dividend yield may be struggling financially and may not be a good long-term investment. A REIT’s stock price may have gone down causing the dividend yield to increase but the real question is whether the decline in the stock price due to a change in the REIT’s fundamentals or is it just because of market sentiment. Looking at the current dividend yields, PREIT has the highest at 9.37% and AREIT has the lowest at 5.47%. It doesn’t mean that PREIT is superior. In fact, its the opposite. AREIT’s portfolio of properties is far, far superior to PREIT’s. Since listing in 2020, AREIT has also increased their annual dividends by +34% in 2021 and by +10.2% in 2022.

Analyzing a REIT’s fundamentals is important: Instead of focusing solely on dividend yield, it’s important to consider other factors such as the quality of the properties in the REIT’s portfolio, the management team’s track record, and the REIT’s financials. It’s always a good idea to conduct thorough research and not just pick a REIT without understanding why. Think of yourself as the actual owner of those properties and decide why you want to own, hold and derive income from them. A well-diversified portfolio that takes into account multiple factors such as dividend yield, portfolio quality, management, and tax implications can provide a more stable and secure investment strategy in the long run.