Since 1981, REITs, as represented by the NAREIT Equity REIT Index, have earned an average annual total return of 12.95 percent. As illustrated in the “NAREIT Equity REIT Annual Returns” chart, 8.39 percentage points, representing 65 percent of the average annual total return, have come from dividends paid to shareholders. The healthy dividends of real estate stocks help make them less volatile than other stocks and provide income and stability to an investor's overall portfolio.

What do REIT dividends mean to shareholders in actual dollars? As shown in “The Importance of the Dividend to Total Returns” chart, a $1,000 investment in a broadly diversified portfolio of REIT stocks in December 1981 would have increased to $2,661 by Nov. 19, 2003, if the investor chose to spend the dividends. However, if the $1,000 was invested in the same portfolio of REITs, with the dividends reinvested, the investment would be $15,877 today—a substantial return on the original investment.

NAREIT Equity REIT Annual Returns (1981–December 2002)

Source: NAREIT.

The Importance of the Dividend to Total Returns (NAREIT Equity Index, December 1980–Nov. 19, 2003)

Source: NAREIT.