REIT Dividend Calculator

Frequently Asked Questions

Why are REIT yields higher than typical stocks?

REITs are required by law to distribute at least 90% of taxable income as dividends to maintain pass-through tax status. This forces yields typically in the 3-6% range, well above the S&P 500 average.

How are REIT dividends taxed?

Most REIT dividends are non-qualified, taxed as ordinary income (up to 37% federal in 2025). However, IRC Section 199A allows a 20% pass-through deduction for REIT dividends through 2025, dropping the effective top rate. REITs work best in IRAs.

What is FFO and why use it instead of EPS?

Funds From Operations adds back real estate depreciation (a non-cash expense that distorts GAAP earnings). It is the standard metric for REIT valuation. P/FFO multiples typically run 12-20x for healthy REITs.

How are REITs affected by interest rates?

REITs are rate-sensitive: rising rates compress valuations (bond competition) and raise borrowing costs. The 2022 rate cycle hit REITs hard, with the sector down 25%+. Specific subsectors (data centers, industrial) tend to be more resilient than mortgage REITs.

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Estimates only. Not investment advice.

Investment Disclaimer: Estimates only. Not investment advice.

This calculator provides estimates for educational purposes only and is not investment advice. Past performance does not guarantee future results. Consult with a qualified financial advisor before making investment decisions. All investments carry risk, including potential loss of principal.

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How This Calculator Works

You enter the number of REIT shares, the share price, the annual dividend per share, an expected annual price-appreciation rate, a holding period, and your ordinary income tax rate. The tool computes your initial investment, current dividend yield, and annual and monthly income, then projects forward. It grows the share price by the appreciation rate, totals the dividends collected over the period, and combines capital gain plus cumulative dividends into a total return and an annualized CAGR. It applies your tax rate to the dividend stream to show after-tax income, and finally benchmarks the whole investment against an S&P 500 growing at its historical 10%.

Formulas Used

Initial investment = shares × price; annual dividend = shares × dividend per share; yield = (dividend per share ÷ price) × 100. Future price = price × (1 + appreciation)^years, future value = shares × future price, and capital gain = future value − initial. Total return = capital gain + (annual dividend × years). CAGR = ((initial + total return) ÷ initial)^1/years − 1. After-tax income applies (1 − tax rate) to dividends. The benchmark grows your initial stake at 10% compounded for the same horizon.

Worked Example

Hold 500 shares of a $50 REIT paying $2.50 a share, with 3% appreciation, over 10 years, taxed at 24%. Initial investment is $25,000 at a 5% yield, generating $1,250 a year (about $104 a month, or roughly $950 after tax). Over 10 years dividends total $12,500, while the price grows to about $67.20 a share - a future value near $33,600 and a capital gain of about $8,600. Total return is roughly $21,100 (84%), an annualized CAGR near 6.3%, which lags an S&P 500 compounding at 10% over the same span.

Common Mistakes

Assuming REIT dividends get the favorable qualified rate - most are taxed as ordinary income, which is why the tool uses your ordinary rate.

Treating the appreciation input as guaranteed; REIT prices are rate-sensitive and can fall when interest rates rise.

Comparing only the yield to the S&P 500 while ignoring its much higher price appreciation - total return is the fair comparison.

Overlooking that the projection does not assume dividends are reinvested.

Tips & FAQ

Federal law requires REITs to distribute 90%+ of taxable income, which is why their yields (typically 4–6%) run several times the S&P 500's. The Section 199A deduction can shield up to 20% of qualified REIT income, lowering effective rates. Categories include equity REITs (own properties), mortgage REITs (hold loans, very rate-sensitive), and hybrids; non-traded REITs differ sharply in liquidity from public ones. REITs offer high income and an inflation hedge as rents reset, but face rate sensitivity, sector concentration, and dividend-cut risk in downturns. Educational only, not investment advice.

Frequently Asked Questions

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