Do REITs Pay Monthly? How Their Dividends Work

Real Estate Investment Trusts (REITs) offer an accessible way to invest in real estate without direct property ownership and management. These investment vehicles pool capital from numerous investors to acquire and manage portfolios of income-generating properties. A common question for prospective investors is whether REITs pay dividends on a monthly basis.

What REITs Are

Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-producing real estate across various property sectors. They enable individuals to invest in large-scale real estate portfolios, such as apartment complexes, shopping malls, or office buildings, without directly purchasing or managing the physical properties. This structure provides a way for everyday investors to gain exposure to the real estate market, similar to how mutual funds allow investment in diversified stock or bond portfolios.

To qualify as a REIT and maintain their tax-advantaged status, these companies must meet several Internal Revenue Service requirements. A primary requirement is distributing at least 90% of their taxable income to shareholders annually as dividends. This high distribution mandate ensures a significant portion of income from real estate assets flows directly to investors. REITs typically generate income through rent collection from properties or interest earned on real estate-backed loans.

REITs generally fall into a few main categories based on their investment focus. Equity REITs, the most common type, own and manage income-producing properties, deriving most revenue from rents. Mortgage REITs (mREITs) provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities, earning interest. Hybrid REITs combine strategies of both equity and mortgage REITs, holding a mix of properties and real estate-related debt.

How REITs Distribute Income

Most publicly traded companies, including many REITs, typically pay dividends on a quarterly schedule. This means investors receive distributions four times a year, often at consistent intervals. This quarterly payment cycle aligns with the financial reporting periods of most corporations, making it a standard practice for managing and distributing earnings.

Some REITs offer monthly dividend payments, appealing to investors who prefer more frequent income streams. While not as prevalent as quarterly payers, a selection of REITs has adopted a monthly distribution model. Examples include:
Realty Income Corporation
EPR Properties
LTC Properties Inc.
STAG Industrial

These monthly distributions can provide a more consistent income flow, which can be appealing for individuals who rely on investment income to cover recurring expenses.

The decision for a REIT to pay dividends monthly versus quarterly depends on its business model and operational cash flow. REITs that consistently generate stable and predictable income, such as those with long-term leases and diversified tenant bases, may be better positioned to support monthly distributions. For instance, certain net lease REITs, which own properties leased to single tenants under long-term agreements, often have highly predictable cash flows that facilitate monthly payments.

The mechanism for dividend distribution involves the REIT’s board of directors declaring a dividend, setting a record date, and a payment date. Shareholders who own the stock on the record date are entitled to receive the dividend, which is then paid on the specified payment date. This process is consistent regardless of whether the dividends are paid monthly or quarterly, ensuring shareholders receive their entitled distributions. The choice of payment frequency can also be a strategic decision by the REIT to attract a broader base of investors who prioritize regular income.

Receiving and Taxing REIT Dividends

Investors typically receive REIT dividends through their brokerage accounts, either as direct cash deposits or through dividend reinvestment programs (DRIPs), where payouts purchase additional shares. The method of receipt can be chosen by the investor, allowing flexibility based on their financial strategy. Understanding their tax treatment is an important consideration.

A key distinction for REIT dividends is their tax classification. Unlike qualified dividends from many other corporations, which are taxed at lower long-term capital gains rates, the majority of REIT dividends are typically taxed as ordinary income. This means distributions are generally subject to an investor’s marginal income tax rate, similar to wages. For high-income earners, this can result in a federal tax rate as high as 37%, plus a potential 3.8% net investment income tax.

The tax treatment of REIT distributions can be nuanced, as portions of the dividend may be classified differently. Some distributions might be designated as capital gains dividends, taxed at long-term capital gains rates. Additionally, a portion might be classified as a return of capital, which is generally not taxed when received. Instead, it reduces the investor’s cost basis in the REIT shares, deferring taxation until the shares are sold. A lower cost basis could then result in a larger capital gain.

For individual taxpayers, a significant tax provision applies to qualified REIT dividends. Through December 31, 2025, investors may be eligible for a deduction of up to 20% of their qualified REIT dividends as part of the Section 199A qualified business income deduction. This deduction can effectively lower the federal tax rate on these ordinary dividends.

Investors receive Form 1099-DIV from their brokerage, detailing the breakdown of their REIT distributions into categories like ordinary dividends, capital gains distributions, and non-taxable return of capital, assisting with accurate tax reporting. Consulting a tax professional for personalized advice is often recommended to understand the specific tax implications for an individual’s financial situation.