2 Preferred Possibilities That Might Be Worth a Look – The Property Chronicle
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2 Preferred Possibilities That Might Be Worth a Look

The Fund Manager

As you might very well know, real estate investment trusts, also known as REITs, are legally required to pay out no less than 90% of their taxable income. That’s how they’re structured to operate in the U.S., and they’re not allowed to exist as a REIT unless they meet that requirement. This is done in the form of dividends: payouts to their shareholders that make them very attractive assets that can generate a whole lot of growth. 

This fact, and the way that this investment universe seems to keep growing by leaps and bounds, has opened up a sizable market to emerge within the REIT world. By this, I’m referring to REIT preferred stocks, which can be an intriguing additional to just about any portfolio.

While I do fully recognize that preferreds aren’t the most well-understood or the most popular stock market direction to go in, there are a few different reasons why you really might want to consider them after all.

For one thing, preferred stock comes by its name for a reason. Anyone owning those particular certificates of a stock get automatic priority when it comes to shareholder payouts – rain or shine. To be clear, they’re not at the absolute top of a company’s list of responsibilities in this regard. Bondholders do get to go before them in this chain of importance… 

But they’re still likely to get paid in the end in the case of a bankruptcy. Their common counterparts, however, are unlikely to receive anything under that unfortunate set of circumstances. It’s just the way it goes.

Plus, most REIT preferred shares are collective investments. And by “most,” I mean 98%. This means that, if a REIT happens to renege on a dividend in one quarter, it will have to pay it out after all just as soon as its back to paying as planned.

The Fund Manager

About Brad Thomas

Brad Thomas

Brad Thomas has been a nationally acclaimed Forbes author, speaker, thought leader and adviser in the commercial real estate industry for over three decades. He is the author of The Intelligent REIT Investor (to be published in May 2021). Thomas is the Editor of the Forbes Real Estate Investor (monthly subscription-based newsletter) and CEO at Wide Moat Research. He is also the Editor-at-large of The Property Chronicle North America. Brad tweets at @rbradthomas

Articles by Brad Thomas

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