Dividend.com (2024)

Dividend.com (1)

Dividend University

Real Estate Investment Trusts (REITs) generally have high yields, making them popular choices for dividend investors. Although REITs trade on exchanges like stocks, the tax structure for these investments can be much different.

REITs: An Overview

For a company to qualify as a REIT, 75% of its assets must be in the form of real estate. These companies allow investors to invest in real estate without purchasing property. REITs are not required to pay income taxes, but must distribute at least 90% of their profits to shareholders in the form of dividends. This policy results in high yields for shareholders, but also higher tax obligations.

See our complete list of REITs here.

Why Are REIT Dividend Yields so High?

Since REITs are required to distribute at least 90% of their taxable income to shareholders in the form of dividends, companies are able to offer investors a much higher dividend than regular stocks.

The average dividend yield for a REIT is over 5%, while the average stock yield is around 3%. REITs can be a great option for investors seeking significant dividend income and exposure to real estate.

Learn about other Dividend Friendly Industries.

However, these high yields come with higher tax expenses than regular stocks. Since corporations that operate as REITs are not required to pay income tax, the tax obligations are passed on to the shareholders.

REIT Tax Policy

Most REIT distributions are considered non-qualified dividends, which means that they do not qualify for the capital gains tax rate. In most cases, an individual will have a 15% capital gains rate on qualified dividends and will be charged their regular income tax rate for non-qualified dividends.

The ObamaCare Surtax

As of January 2, 2013, the dividend and capital gains tax rate is 20% for investors making over $400,000 and households making over $450,000. Please refer to the table below:

Ordinary Tax RateQualified DividendsNon-Qualified Dividends
33%15% 33%

Unrelated Business Taxable Income (UBTI)

Unrelated Business Taxable Income (UBTI) is a tax from unrelated business activities that would otherwise be tax free. REITs generally try to lower the amount on UBTI to their shareholders, making this tax rare for shareholders.

Choosing the Right Account for a REIT

While owning a REIT in an open account will result in unfavorable tax rates, an IRA, Roth IRA or 401(k) can be much more tax friendly. While finding a tax friendly retirement account, it is important to know to key differences in Traditional and Roth IRAS.

Roth Vs. Traditional IRA

Both Roth and Traditional IRA accounts offer significant tax breaks. A Traditional IRA allows investors to receive a tax break in the year that the investment is made, but it requires the investor to pay taxes when the money is withdrawn. A Roth IRA has no immediate tax breaks for investors, but it’s tax free when the money is withdrawn.

For an investor who expects to have a lower tax bracket when they withdraw money, a traditional IRA is probably the best choice. This gives the investor an immediate tax break. On the other hand, an investor who expects to be in a higher tax bracket when the money is withdrawn, a Roth IRA may be a better choice since withdrawals are tax free after the age of 59 and a half.

Click here for more information on Roth and Traditional IRAs.

REITs in 401(k) Plans

For investors that do not want to own individual REITs in their IRA, adding exposure to real estate in a 401(k) plan can be a great way to add diversity to a retirement portfolio in a tax efficient way. There are many mutual funds and ETFs available that have REIT exposure.

Click here for a complete list of REIT-focused ETFs.

REITs & Dividend Reinvesting

Dividend ReInvestment Programs (DRIPs) are a great way to grow your dividend investment at a low cost or no cost at all. Many REITs have created DRIP programs for investors. For REITs that do not have these programs, many major brokers have this option available. However, it is important to understand that a DRIP program will not defer or eliminate any taxes unless the REIT is in a tax efficient account like an IRA.

Be sure to read this Simple Guide to Understanding 401(k)s.

The Bottom Line

For yield-starved investors, REITs offer a lucrative antidote as they are inherently structured to deliver a regular stream of current income. For most investors, holding REITs in tax-sheltered accounts is the ideal approach to minimizing their tax burden. With that being said, there is a number of other considerations and nuances to take into account before making an allocation, so be sure to do your homework first.

Dividend.com (2024)


Is dividend.com free? ›

DARS™ (Dividend Advantage Rating System) rates dividend stocks across five distinct criteria: relative strength, overall yield attractiveness, dividend reliability, dividend uptrend, and earnings growth. Dividend.com offers free content available to the general public as well as premium subscription service.

How do you solve for dividend payout? ›

To calculate the dividend payout ratio, the formula divides the dividend amount distributed in the period by the net income in the same period. For example, if a company issued $20 million in dividends in the current period with $100 million in net income, the payout ratio would be 20%.

Is dividend.com worth it? ›

Subscribing to Dividend.com has completely transformed my investment perspective. The simple advice and daily emails are a great reminder that investments have a long term horizon and that dividends are where our wealth can be accumulated. Excellent work!”

How reliable is dividend income? ›

Dividend Stocks are Always Safe

However, just because a company is producing dividends doesn't always make it a safe bet. Management can use the dividend to placate frustrated investors when the stock isn't moving.

What is the best website for dividend information? ›

Popular Investor Websites for Dividend Paying Stocks
  • Sharesight. ...
  • Dividend.com. ...
  • Gurufocus. ...
  • Insider Monkey. ...
  • TipRanks. ...
  • Kiplinger. Total Visits as of January 2023: 5.1 million. ...
  • Morningstar. Total Visits as of January 2023: 8.1 million. ...
  • Benzinga. Total Visits as of January 2023: 19.1 million.
Mar 17, 2023

What is the best site to research dividend stocks? ›

Sites like CNBC, Morningstar, The Wall Street Journal, and Investopedia are all great resources available for researching dividend data. For example, on Investopedia's Markets Today page, you can use the stock search tool to enter the company name or ticker symbol that you're researching.

How much dividend on 1 million? ›

Stocks in the S&P 500 index currently yield about 1.5% on aggregate. That means, if you have $1 million invested in a mutual fund or exchange-traded fund that tracks the index, you could expect annual dividend income of about $15,000.

What is the dividend calculator? ›

A Dividend Yield calculator is a tool that helps investors determine the annual dividend income relative to the current market price of a stock. It's expressed as a percentage and provides insights into the income potential of an investment.

What is a good dividend yield? ›

What Is a Good Dividend Yield? Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.

What is the safest dividend stock? ›

Safe Dividend Stock #1

Ameriprise Financial (AMP) has a market capitalization above $30 billion, with more than 12,000 employees, and more than $1 trillion in assets under management. The company's operating segments include Advice & Wealth Management, Asset Management, Annuities, and Protection (insurance products).

What is the best dividend company of all time? ›

UGI Corporation (NYSE:UGI)

It is one of the best dividend stocks of all time as the company has paid regular dividends to shareholders for the past 139 years. Moreover, it has raised its payouts in each of these 36 years.

What are the pros and cons of dividends? ›

The Pros & Cons Of Dividend Stock Investing
  • Pro #1: Insulation From The Stock Market. ...
  • Pro #2: Varied Fluctuation. ...
  • Pro #3: Dividends Can Provide A Reliable Income Stream. ...
  • Con #1: Less Potential For Massive Gains. ...
  • Con #2: Disconnect Between Dividends & Business Growth. ...
  • Con #3: High Yield Dividend Traps. ...
  • Further Reading.
Nov 22, 2023

What are the top 5 dividend stocks to buy? ›

20 high-dividend stocks
CompanyDividend Yield
CVR Energy Inc (CVI)8.97%
Eagle Bancorp Inc (MD) (EGBN)8.85%
Evolution Petroleum Corporation (EPM)8.82%
Altria Group Inc. (MO)8.71%
17 more rows
May 22, 2024

Which stock pays the highest dividend in 2024? ›

List of 10 Highest Dividend Paying Stocks in India
  • IL&FS Investment Managers Ltd. 7.08.
  • Vedanta Ltd. 6.78.
  • Coal India Ltd. 5.28.
  • Styrenix Performance Materials Ltd. 5.14.
  • Indian Oil Corporation Ltd. 4.92.
  • Embassy Office Parks REIT. 4.68.
  • Bank of Maharashtra. 4.21.
  • Bharat Petroleum Corporation Ltd.
May 17, 2024

Which stocks pay the most dividends? ›

List of Highest Dividend Paying Stocks In India 2024
CompanyDividend Percentage %Ex-Date
Hero Motocorp3750.00 (+ Special 1250.00) = 5000.0021-02-2024
Oracle Fin Serv4800.0007-05-2024
18 more rows

Is dividend max free? ›

Create a free account

30 day trial to our Premium dividend tools. Completely free, no fuss.

How much do you have to pay on dividends? ›

To summarize, here's how dividends are taxed, provided that the underlying dividend stocks are held in a taxable account: Qualified dividends are taxed at 0%, 15%, or 20%, depending on your income level and tax filing status.

What is a dividend fee? ›

Dividend Fees means any fees levied or charged to the Custodian by a Clearance System in relation to the payment, clearing and/or processing of any dividends arising in relation to the Securities.


Top Articles
Latest Posts
Article information

Author: Jamar Nader

Last Updated:

Views: 5455

Rating: 4.4 / 5 (75 voted)

Reviews: 82% of readers found this page helpful

Author information

Name: Jamar Nader

Birthday: 1995-02-28

Address: Apt. 536 6162 Reichel Greens, Port Zackaryside, CT 22682-9804

Phone: +9958384818317

Job: IT Representative

Hobby: Scrapbooking, Hiking, Hunting, Kite flying, Blacksmithing, Video gaming, Foraging

Introduction: My name is Jamar Nader, I am a fine, shiny, colorful, bright, nice, perfect, curious person who loves writing and wants to share my knowledge and understanding with you.