Looking for dividends? Try REITs

ByABC News
February 15, 2012, 8:11 PM

— -- Q: How do dividend yields at real-estate investment trusts rank among the Standard & Poor's 500?

A: Investors looking for cash flow are learning to love a four-letter word: REIT.

REITs, or real estate investment trusts, are unique investments that primarily buy into commercial property like office buildings, shopping centers and apartments. These investments, due to their limited line of business and focus on commercial property, tend to have stable cash flow. And most importantly to investors, they are often required to pay nearly all their earnings back to investors in the form of dividends.

It's this requirement of REITs to return cash to investors that makes them especially attractive to investors looking for income. And it's not unheard of for some yield-hungry investors to load up on REITs just for the dividends they pay out.

As a group, REITs on average do tend to pay a higher dividend yield than the average company in the S&P 500 does. But don't make the mistake of assuming that just because a stock is a REIT that its dividend yield would be one of the biggest compared with companies that aren't REITs.

Top 20 highest dividend-yielding stocks in the S&P 500, according to S&P Capital IQ as of Feb. 9, 2012:

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz