Best REITs for Dividends: High-Yield Real Estate Income Investments

• Due to their high dividend yield, real estate investment trusts are often used in income investing strategies.
• High-yield REITs generate passive income equalling at least 10% of the stock’s value. This is because they are required to distribute at least 90% of their taxable income.
• REIT dividends are most often taxed at ordinary income rates.
• REIT investing enables investors to earn real estate income without incurring maintenance and management costs. Some dividend REITs pay monthly dividends, which are essentially equivalent to rental income.

This article will explore the different types of REIT and explain how to select the most suitable ones for dividends.

What Are REITs and Why They Pay High Dividends

Real estate investment trusts operate under the 1960 law. Their goal is to make real estate investment accessible to those with limited capital. In order to adopt a REIT structure, a company must meet IRS requirements:

1. At least 75% of assets should be invested in real estate. The portfolio may also include cash and treasuries.
2. At least 75% of gross income must come from real estate or interest on mortgage securities.
3. At least 90% of taxable income should be distributed to shareholder dividends.

REIT regulations also stipulate that the company must have tax corporation status and be managed by a board of directors. The trust must have more than 100 shareholders, and together, the five largest shareholders cannot own more than 50% of the shares.

Real estate investment trusts are exempt from corporate taxation if they meet the 90% distribution requirement. However, as a result, REITs do not fulfil the dividend requirements necessary for their dividends to be considered ‘qualified’, meaning investors cannot benefit from tax advantages.

The requirement to distribute 90% of taxable income to shareholders can result in significant disadvantages. REITs primarily grow their property portfolios through external financing. In order to attract money, trusts resort to borrowing, issuing bonds and other methods. Consequently, their investments in shares result in slow capital appreciation.

Types of REITs for Dividend Investors

The best dividend REITs can be divided into three types:

1. Equity REITs – generate income through property ownership. Over 90% of REITs fall into this category.
2. Mortgage REITs (mREITs) – earn income from mortgage-backed securities. Around 5% of companies fall into this category.
3. Hybrid REITs – combine the strategies of the two aforementioned types. Such REITs are very rare, as there has been a trend towards specialization within REIT categories since 2009.

In terms of liquidity, there are three REIT categories:

1. Publicly traded REITs are stocks that are available on stock exchanges. According to the National Association of REITs, there are currently more than 200 publicly traded REITs in the USA.
2. Non-traded REITs – one can buy shares through participating financial advisors and brokers, such as Fundrise.
3. Private REITs. They are primarily intended for institutional investors.

Selling shares in publicly traded REITs is much easier than selling actual properties. Considerable liquidity is one quality that attracts investors with limited capital. However, non-traded and private REITs lack this advantage. These are mainly used as a hedge against declines in the value of other asset classes.

Top High-Yield Dividend REITs by Category

This section presents the Best Dividend REITs 2025. It showcases the most reliable payers and ultra high dividend REITs, offering an excellent opportunity to maximize current income.

Chimera Investment Corp. (CIM) primarily invests in residential mortgage loans and agency RMBS. Its portfolio also includes agency commercial MBS and other real estate-related securities. The dividend yield is 10.52%. However, the trust has reduced its payouts over the past five years.

Pennymac Mortgage Investment Trust (PMT) invests in residential mortgage loans and other mortgage-related assets. Its dividend yield is 12.91%. The 5Y dividend growth rate is -15%. Nevertheless, like other mortgage REITs, this trust will benefit from falling interest rates.

AGNC Investment Corp. (AGNC) primarily deals in agency mortgage-backed securities (MBS). The company primarily focuses on residential real estate. Its dividend yield is 14.83%. The trust has paid dividends to shareholders for 17 consecutive years, with the payout amount remaining unchanged for the past 4 years. Thanks to this stability, AGNC Investment Corp is one of the best REITs that pay monthly dividends.

Orchid Island Capital (ORC) is an externally managed mortgage REIT that specializes in RMBS, including passthrough and structured agency RMBS. Its 5Y dividend growth is 71%, and its stock price has been in a downward trend since 2017.

However, ORC is a leading REIT in terms of income, paying monthly dividends. The trust’s forward distribution yield is 19.7%. It also ranks among the best REITs with high dividends.

The Community Healthcare Trust (CHCT) falls into the healthcare REITs category. Its tenants include medical and rehabilitation centres, among others. The dividend yield is 11.35%. The trust has paid dividends for 10 consecutive years and increased its payouts over the last 3 years.

Realty Income (O) is one of the best REITs with monthly dividends. This trust has increased its distributions for 56 consecutive years. Most of its real estate properties are retail spaces. Its main advantage is its stable occupancy rates, which do not decline even during periods of crisis. The dividend yield is 5.58%.

Best REIT Sectors for Dividend Income 

Finance professionals often cite sector diversification as the key to dividend stability. REITs can be classified by property type:

1. Healthcare REITs are regarded as defensive sectors. This is due to the inelastic demand for medical services and an ageing population.
2. Industrial REITs include warehouse and logistics REITs, the latter of which benefit from the growth of e-commerce.
3. Residential REITs are trusts that own residential properties in areas with growing populations, which ensures stable demand. They are protected against inflation because leases often include gradual rent increases.
4. Retail REITs are vulnerable to cyclical risks and are under pressure from electronic commerce. When selecting stocks, it is important to pay special attention to tenant quality.
5. Specialty REITs encompass trusts that operate with non-traditional types of real estate. Examples include data centres, mobile phone masts and agricultural land. The risks and potential of such stocks depend on the specific type of activity.

Long-term investors often opt for recession-resistant REITs, which perform better than the sector as a whole during periods of crisis. As well as healthcare REITs, this category includes trusts that work with data centres and commercial properties suitable for selling essential goods and products.

The table below shows the REITs with the highest forward yields at the time of writing. As can be seen from the table, dividends do not guarantee total return.

Ticker	Name	YieldFwd Div	YTDTot Ret
CHMI	Cherry Hill Mortgage Investment Corp.	22.64%	19.21%
MNR	Mach Natural Resources LP	20.41%	-4.01%
ORC	Orchid Island Capital, Inc.	19.70%	5.21%
IVR	Invesco Mortgage Capital Inc.	17.59%	4.57%
ARR	Armour Residential Reit, Inc.	17.27%	-2.73%

According to dividend.com as of 07/29/2025

Mortgage REITs: Ultra-High Yields with Higher Risk 

Mortgage REITs generate income by investing in long-term mortgage-backed securities. To increase yields, these trusts often use leverage. Sources of additional financing for mREITs include short-term loans, such as repos. One of the most important metrics for evaluating mREITs is book value, calculated as the difference between assets and liabilities.

Mortgage REITs carry high interest rate risk. When the Federal Reserve tightens monetary policy, the net interest margin narrows. This margin represents the difference between income earned on long-term assets and financing costs.

Investments in such companies involve credit risk. This risk is lower for trusts that work with agency MBS. These securities are backed by pools of residential mortgage loans. However, if a trust invests in commercial MBS, the risks may be higher due to the more complex characteristics of commercial real estate mortgage programmes.

Agency MBS are issued or guaranteed by government agencies, such as Fannie Mae, Freddie Mac and Ginnie Mae. Consequently, these securities are considered highly secure.

Another risk faced by mREITs is the prepayment risk. Mortgage borrowers often choose this option when interest rates are low. This reduces the future interest payments received by the company.

Mortgage REITs offset these risks by offering higher dividends. Their yields can exceed 20%.

REIT ETFs and Mutual Funds for Dividend Diversification

REIT ETFs offer instant diversification within the real estate sector. ETFs are usually passively managed funds that track a particular index. Consequently, they have low expense ratios.

The Vanguard Real Estate ETF (VNQ), for example, tracks the performance of the MSCI US Investable Market Real Estate 25/50 Index. Shareholders receive quarterly distributions. The current dividend yield is 3.78%. The iShares Core REIT ETF (USRT) has a dividend yield of 2.94%. USRT tracks an index comprising U.S. real estate equities. This includes REITs traded on U.S. exchanges, but excludes infrastructure, mortgage and timber REITs. 

Like other mutual funds, REIT mutual funds offer their shareholders the benefits of diversification. Most of them are actively managed. Professional management can optimize REIT fund performance.

Tax Implications of REIT Dividends 

REIT dividend taxation is subject to ordinary income tax rates. In most cases, these distributions cannot be considered ‘qualified dividends’.

When using taxable accounts, the federal tax rate ranges from 10% to 37%, depending on the investor’s income. Therefore, it is advisable to purchase REIT shares within Tax-Advantaged Accounts, such as IRA Investing. Another strategy for improving tax efficiency is tax-loss harvesting.

Another issue related to REITs is when the trust sells part of the property. In this case, it is possible that the distribution will be classified as a return of capital. Depreciation recapture may also result in additional tax obligations.

Key Metrics for Evaluating REIT Dividends

In order to identify the best dividend paying REITs, it is necessary to use industry-specific multiples. Metrics such as P/E and the payout ratio based on net income, which are widely used, can provide distorted information.

Let’s consider the key parameters for REITs:

1. Funds from operations (FFO). This metric takes into account net income, depreciation and amortization, as well as losses from property sales. Gains from property sales and any interest income are subtracted.
2. Adjusted funds from operations (AFFO). To calculate AFFO, add one-off expenses to FFO. Then, subtract periodic capital expenditure and steady rent payments from this amount.
3. The dividend coverage ratio is based on FFO. It is calculated by dividing the annual dividend by FFO.
4. Occupancy rates. These allow us to assess demand for the trust’s real estate assets.
5. Net operating income. This represents the difference between revenue and operating expenses.

Popular multiples such as the debt-to-equity ratio and the interest coverage ratio can be used to evaluate the creditworthiness of trusts.

Risks and Considerations for REIT Dividend Investors

Investing in REITs with best dividends comes with certain risks. Let’s consider the main ones:

1. Leverage risk. If borrowing costs exceed income from securities, REITs incur losses. This risk is directly related to changes in interest rates.
2. Interest rate risk. When the Federal Reserve raises interest rates, the profits of REITs decline, resulting in dividend cuts.
3. Real estate cycles risk. This category encompasses fluctuations in property values and rental income. The type of real estate and its economic sensitivity are also important factors. Commercial REITs are particularly susceptible to this risk.

When selecting REIT stocks, it is important to consider management quality and tenant credit quality. Investments in non-traded trusts also carry liquidity risk.

When constructing a portfolio, it is important to take into account the risk of sector concentration. Financial advisors recommend diversifying real estate investments by selecting REITs with different areas of specialization.

Investment Strategies for REIT Dividend Portfolios 

Even the best REITs dividends cannot be considered a risk-free source of steady stream of cash. Therefore, standard portfolio diversification requirements must be observed when investing. As with any other sector, real estate is allocated between 5% and 15% of the total capital.

To maintain this proportion, the portfolio rebalancing is necessary at least once a year. Another key part of the portfolio strategy is risk management, which is achieved by REIT allocation to high-yield and defensive types, and by investing in REITs with geographic diversification.

Dividend reinvestment contributes to future income laddering. It also leads to dollar-cost averaging. Statistics show that it is more effective to gradually increase positions over many years than to wait for the optimal entry point on the market.

An alternative to the ‘buy and hold’ strategy is sector rotation. With this approach, investors move their capital around depending on what stage of the economic cycle we are in.

Another popular REIT investment strategy is to generate monthly cash flow. To this end, investors select the best REITs paying monthly dividends. The most well-known example of this is Realty Income. Other stocks that provide a regular income include EPR Properties, LTC Properties and Stag Industrial.

How to Get Started Investing in Dividend REITs

Getting started with REIT investing requires a brokerage account. These can be opened with online brokers. Unlike traditional full-service brokers, online brokers often offer commission-free trading or trading with minimal fees. They also provide research tools for analysing stocks and dividend tracking.

Investing in REITs within IRA accounts or 401(k) plans is advisable. This allows for tax optimization and can increase overall returns.

Many beginners prefer ETFs or mutual funds. If you are considering mutual funds, it is important to check the minimum investment threshold and whether there are any fees, such as front-end or back-end loads.

FAQ 

Which REIT has the highest dividend?

According to Dividend.com, Cherry Hill Mortgage Investment Corporation had the highest dividend yield among REITs at the end of July 2025. This is 22.64%. In terms of monthly dividends, Orchid Island Capital is the leader with a yield of 19.7%.

Does Warren Buffett invest in REITs?

Warren Buffett generally avoids this sector. Berkshire Hathaway Inc. owned shares in STORE Capital Corp. for some time, but sold them in 2023.

Can you live off REIT dividends?

The best monthly dividend REITs can form an important part of a retirement portfolio. However, it is extremely risky to rely solely on one sector due to the unstable payout characteristics of most REITs.

Are high dividend REITs safe?

Abnormally high yields always indicate high risk. REITs with high dividend yields currently have very low dividend safety ratings.

The Bottom Line

REIT dividend investing for income generation can be an effective strategy. However, it requires sound risk management to be successful. Interest rate changes and real estate market cycles are the main factors influencing real estate exposure. 

The main advantage of REITs is that they provide investors in the early stages of long-term wealth building with access to real estate. This enables diversification benefits through an asset class that is less correlated with the broader market.

Article Sources

• National Association of Real Estate Investment Trusts (2024). “REITWatch Monthly Statistical Publication.” Nareit Research, tracking REIT industry performance data including dividend yields and distribution patterns.
• University of Wisconsin (2024). “REIT Performance Study.” Academic research analyzing REIT dividend sustainability and performance metrics, page 106 of financial markets research.
• FTSE Russell (2024). “FTSE Nareit U.S. Real Estate Index Series Methodology.” Technical documentation covering REIT performance measurement and dividend tracking methodologies.
• CEM Benchmarking (2024). “Real Estate Investment Performance Study.” 25-year analysis of asset class performance showing REITs posted 9.7% average returns versus 7.7% for private real estate between 1998-2022.