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REITs vs. Stocks
A side-by-side look at how REITs and broader stocks compare on income, taxation, valuation metrics, and price volatility
How Each One Works
A real estate investment trust (REIT) is, technically speaking, a stock. Shares of publicly traded REITs are bought and sold on exchanges like the NYSE or Nasdaq the same way shares of a bank, a software company, or a retailer are. What sets a REIT apart is its business and its structure: a REIT exists to own, operate, or finance income-producing real estate, and it must follow specific tax rules — including paying out at least 90% of its taxable income as dividends — to keep that status. See What Is a REIT? for the fundamentals.
A "regular" stock can represent a company in any industry, with no requirement to distribute earnings and far more discretion over how profits are used — reinvested in the business, spent on buybacks, or paid out as dividends.
What They Have in Common
- Both are equity securities bought and sold through a standard brokerage or retirement account.
- Both can be held individually or through index funds and ETFs.
- Both trade continuously during market hours, so prices move throughout the day.
- Both are researched using public filings and financial statements, though the specific metrics used differ.
- Both can be volatile over short periods, reflecting broad market sentiment as well as company fundamentals.
- Both are subject to the same basic securities laws and disclosure requirements once they are publicly traded.
Where They Diverge
The practical differences show up mainly in income, taxes, and what drives the share price. The table below summarizes the main points, and the sections that follow go into more detail on income, taxation, and volatility.
| Factor | REITs | Other stocks |
| Underlying business | Owns or finances real estate; income tied to rent, occupancy, and property values | Any industry — technology, retail, manufacturing, and more |
| Distribution requirement | Must pay out at least 90% of taxable income | No requirement; payout is a management choice |
| Typical dividend yield | Generally higher than the broad market average | Varies widely; many pay little or nothing |
| Dividend tax treatment | Usually ordinary income, though a portion may qualify for a deduction | Often taxed at lower qualified-dividend rates |
| Key valuation metric | FFO and AFFO, not EPS | Earnings per share (EPS) |
| Sensitivity to interest rates | Often notable, given reliance on debt and comparisons to bond yields | Varies by sector and balance sheet |
| Number of companies | A few hundred publicly traded REITs across a handful of property types | Thousands of companies spanning every industry |
Income and How It Is Taxed
REIT dividends are typically taxed as ordinary income rather than at the lower qualified-dividend rate that applies to many corporate dividends — a trade-off for the fact that REITs generally do not pay corporate income tax themselves. A portion of REIT ordinary dividends may also qualify for the Section 199A deduction, which lets individual taxpayers deduct a share of that income before it is taxed. See how REIT dividends are taxed and the Section 199A deduction for the full picture, and dividend yield, explained for how REIT yield is calculated.
This distinction matters most inside a taxable brokerage account; inside a retirement account such as an IRA, annual dividend tax treatment is less relevant, since distributions generally are not taxed as they are received. The higher typical REIT yield and its ordinary-income tax treatment are related: because REITs pass most of their income through without paying corporate tax first, more cash is available to distribute, but the tax obligation on that income shifts from the company to the shareholder instead.
Volatility and Interest Rates
Because REITs carry real estate debt and are sometimes compared with bond yields as an income alternative, their share prices can react to interest-rate expectations somewhat differently than a typical operating company reacts. See interest rates and REITs for how that relationship works. That reaction is not automatic or uniform — it can vary by REIT sector, property type, and the specific reason rates are moving, such as inflation concerns versus economic growth. Non-REIT stocks are exposed to interest rates too, but the transmission mechanism — through borrowing costs, consumer spending, or valuation multiples — varies much more by sector.
Using Both in a Portfolio
Many investors hold both REITs and non-REIT stocks, using REITs for real estate exposure and income and broader equities for diversification across other industries. Investors can research individual REITs on the REIT screener or by browsing REIT profiles, or compare that approach with REIT ETFs vs. individual REITs. Some investors also compare REIT sector weightings against a broad stock index, since real estate historically makes up a relatively small slice of total market capitalization compared with its share of the overall economy. Whether REITs, broader stocks, or a mix of both fits a given portfolio depends on an investor's income needs, tax situation, and diversification goals.
- REITs are legally stocks, but their 90% distribution requirement and real-estate-only focus set them apart from the rest of the market
- REIT dividends tend to be higher-yielding but are usually taxed as ordinary income rather than at qualified-dividend rates
- REITs are valued using FFO and AFFO rather than the EPS-based metrics used for most other stocks
- Both REITs and broader stocks trade intraday and can be volatile in the short term
- Combining REITs with other stocks is one way investors diversify across asset types, industries, and income profiles
See it in the data: Compare REITs across sectors → Browse all REIT profiles →
Research and education only — nothing here is investment advice. Figures such as the 90% distribution rule are general and can change; always confirm against a company's filings.