Investing in dividend stocks can be a great way to grow wealth over time. However, income investors often find themselves debating between real estate investment trusts (REITs) and traditional dividend stocks.
REITs operate by purchasing properties, renting them out, and sharing the rental income with investors. They are required to pay out at least 90% of their taxable income as dividends. Most REITs fall into two categories: gross lease and net lease. Gross lease REITs offer all-inclusive rental agreements, while net lease REITs charge lower rent but do not cover operating expenses.
For younger investors, it may be more beneficial to invest in lower-yielding dividend growth stocks, while older investors seeking passive income may find higher yields in REITs compared to fixed-income investments like CDs and bonds. The decision between REITs and other dividend stocks ultimately depends on individual risk tolerance and investment goals.
It can be beneficial to have a mix of REITs, dividend stocks, and CDs in an income-generating portfolio. Understanding the differences between these investment options is key, rather than focusing on one as the best choice.
Before investing in Realty Income, consider that the Motley Fool Stock Advisor team has identified what they consider to be the 10 best stocks for investors to buy now. While Realty Income may not be on that list, the selected stocks could potentially offer significant returns in the future. The Stock Advisor service has outperformed the S&P 500 since 2002, providing investors with expert guidance and regular updates on stock picks.
It’s important to carefully consider your investment choices and diversify your portfolio based on your own financial goals and preferences. Remember to always do your own research and consult with a financial advisor before making any investment decisions.