REITs: a once-in-a-decade passive income opportunity?

As dividend yields approach their highest point in over a decade, Zaven Boyrazian thinks REITs could be a highly lucrative income investment in 2025.

Posted by

Zaven Boyrazian, CFA❯

Published 6 August

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Real estate investment trusts (REITs) aren’t very fashionable right now. The higher interest rate environment is putting a lot of pressure on these debt-ridden businesses. But with rates steadily falling, and many continuing to generate stable cash flows, dividends are still being put in investor pockets.

The combination of dividends with lower share prices has steadily pushed yields higher over the last couple of years. As such, some yields are now starting to climb beyond 8%!

Investing in REITs

Generally speaking, most REITs own and lease rental property to tenants. Providing that 90% of net profits are redistributed to shareholders, they don’t have to pay any tax, making them highly lucrative dividend investing vehicles. However, despite the name, REITs don’t have to exclusively focus on real estate.

However, with so much profit being paid out, these businesses are often almost entirely dependent on external financing. As such, they tend to be highly leveraged enterprises. That was fine for most of the last 15 years. But when interest rates started climbing again, high debt burdens proved quite troublesome for many REITs, increasing investment risk.

Since interest rates are still relatively high, REITs remain unpopular in 2025. Yet not all of these businesses are in jeopardy, potentially giving smart investors a rare chance to lock in enormous yields.