Real Estate Sector Screener
REITs (Real Estate Investment Trusts) are legally required to pay 90%+ of taxable income as dividends, making them high-yield instruments. They're highly sensitive to interest rates — rising rates increase borrowing costs and make REIT yields less competitive vs. bonds.
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About the Real Estate Sector
Real Estate Investment Trusts (REITs) own and operate income-producing real estate across dozens of property types: office buildings, shopping malls, apartments, industrial warehouses, data centers, cell towers, hospitals, and more. Each property type has distinct supply/demand dynamics, lease structures, and tenant quality.
REITs are structured to pass through income to shareholders — by law, they must distribute at least 90% of taxable income as dividends. This makes them one of the highest-yielding sectors in the equity market and explains their interest rate sensitivity: when bond yields rise, REIT dividend yields must rise too to remain competitive, requiring price declines.
Valuation for REITs uses FFO (Funds From Operations) rather than EPS. FFO adds back real estate depreciation to net income, reflecting the economic reality that well-maintained properties don't depreciate. Price-to-FFO (similar to P/E) and FFO yield are the standard valuation metrics.
The fastest-growing REIT sub-sectors are data centers (driven by cloud and AI infrastructure demand), industrial/logistics (e-commerce fulfillment), and cell towers. Traditional retail REITs (mall operators) face structural headwinds from e-commerce; office REITs face uncertainty from remote work trends.
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Frequently Asked Questions
- What is FFO and why do REITs use it instead of EPS?
- Funds From Operations (FFO) = Net Income + Real Estate Depreciation - Gains on Property Sales. Since real estate is a depreciating asset on an accounting basis but actually appreciates in most environments, adding back depreciation gives a more accurate picture of cash earnings. Price-to-FFO and FFO yield are the standard REIT valuation metrics.
- How do interest rates affect REIT stocks?
- Two mechanisms: First, REITs borrow heavily to acquire properties — higher rates increase their cost of capital and compress margins. Second, as bond yields rise, REIT dividend yields look less attractive, causing valuation compression. REITs are generally one of the most negatively correlated sectors to interest rate increases.
- What is the difference between an equity REIT and a mortgage REIT?
- Equity REITs own and operate physical properties (buildings, land). Mortgage REITs (mREITs) invest in mortgages and mortgage-backed securities — they earn the spread between their borrowing costs and mortgage yields. mREITs are leveraged interest rate plays with higher risk than equity REITs.
- Which REIT sub-sectors are best for different market environments?
- Rising rates: None do well, but industrial and data center REITs with long-term leases and strong demand support prices better. Falling rates: All REITs benefit; residential and office REITs tend to see the largest multiple expansion. Recession: Healthcare REITs (hospitals, senior housing) and industrial logistics tend to be most resilient.
Data is provided for informational purposes only and does not constitute investment advice. Sector analysis reflects general characteristics and does not account for individual stock performance. Past performance is not indicative of future results.