A Real Estate Investment Trust (REIT) is an investment vehicle that holds rental properties. These trusts trade on the Johannesburg Stock Exchange (JSE) like regular shares. They predominantly hold commercial properties. This means that the rental agreements are usually for longer terms, which translates to consistent rental returns.
REITs pay 90% of their profit to shareholders which are taxed as income. Therefore, compared to shares, REIT dividend yields are high. The risk is distributed over numerous properties. So, if one of the properties’ rental yield is down, the rental income will not be affected drastically.