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Building a portfolio of high dividend paying stocks? Think about including some REITs

by , 07 April 2014

If you want a portfolio that pays you an income then dividend paying stocks are the way to go. But what sectors of the market should you look to? Real estate investment trusts (REITs) can offer you high dividends payments. Including a few of these in your dividend paying portfolio could pay off. Let's take a closer look at what REITs can add to your portfolio…

The ins and outs of REITs

Real estate investment trusts (or REITs) are property companies listed on the stock exchange, reits.co.za explains. These property companies invest in rental properties. These range from commercial property to residential property.

REITs are a fairly new addition to the Johannesburg Stock Exchange. The new status became available at the end of 2012.

The reason that many property companies opt to become REITs is for tax purposes. The REIT status means they pay less tax to the government.

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By buying REITs, you’re investing in the property assets of the company you buy.

Why REITs pay high dividend yields

REITs are one of the highest dividend yielding sectors on the Johannesburg Stock Exchange.

This is because of the REIT classification. As part of not paying as much tax, the company must pay out 75% of its rental profits as dividends. This can result in high dividend yields.

One advantage of investing in REITs is the generally high dividend yield.

Of course, as with all things investing, nothing is a certainty.

Earlier today, Vividend Income Fund, a REIT, announced an 11% fall in its pay-out to shareholders, reports IOL. The company blamed an increased vacancy rate. This resulted in lower rental income, which affected rental profits.

So there you have it, why you could include some REITs if you’re building a portfolio of high dividend paying stocks.

Building a portfolio of high dividend paying stocks? Think about including some REITs
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