Real estate investment trusts were created by Congress in 1960 to better allow regular investors access to invest in real estate. Specifically, REITs own and operate real estate, and in exchange for certain tax benefits, they’re required to pay out at least 90% of their taxable income as dividends to shareholders. These distributions often are more generous than the average stock, making REITs a beloved source of dividend income.
The iShares Core U.S. REIT ETF (USRT, $45.10) is one of the cheapest ways to invest in this space, and one of the most diversified REIT index funds as well. USRT holds nearly 160 REITs, spanning categories such as retail, residential, office, industrial, healthcare and hotels.
The fund is a little top-heavy, with large REITs such as Simon Property Group (SPG, 6.3%), Prologis (PLD, 4.2%) and Equinix (EQIX, 4.1%) accounting for large chunks of the ETF’s performance. Still, it’s diversified enough across specialty to help mitigate at least some risk.
USRT also shows the income power of REITs, yielding 3.6% at the moment – more than double S&P 500-tracking ETFs.
SEE ALSO: 10 REITs That the Insiders Love