Project REIT dividend income and reinvestment growth from share price, distribution per share, growth rate and holding period.
| Scenario (100 shares) | Shares at End | Dividends Collected | End Value |
|---|---|---|---|
| $50 / $4.00 div / 3% growth / 10yr / reinvest | 215.9 | $6,767 | $14,507 |
| $80 / $5.60 div / 2% growth / 10yr / reinvest | 196.7 | $8,565 | $19,184 |
| $25 / $2.50 div / 4% growth / 20yr / reinvest | 672.7 | $23,856 | $36,852 |
| $50 / $4.00 div / 3% growth / 10yr / cash | 100.0 | $4,586 | $6,720 |
Every row starts with 100 shares and applies the same compounding loop the calculator runs: shares grow by dividend payment ÷ price when reinvestment is on, the share price (and the dividend with it) grows at the rate you enter, and the end value is final shares × final price.
| Metric | Why it matters | Healthy range |
|---|---|---|
| Dividend yield | Income per dollar invested | 3% – 6% |
| Payout ratio (FAD) | Distributions vs. free cash | 70% – 90% |
| FFO per share growth | Rent growth & occupancy | 2% – 5% / yr |
| Debt / EBITDA | Balance-sheet risk | Under 6× |
REIT yields look high against ordinary stocks because REITs must distribute at least 90% of taxable income. A yield far above peers — say 9% — usually signals a falling share price rather than a rich payout, so always check the payout ratio against funds from operations (FFO) before chasing the headline number.
A real estate investment trust (REIT) is a company that owns income-producing property and qualifies with the IRS under Section 856. In exchange for distributing at least 90% of its taxable income to shareholders, a REIT avoids corporate-level tax. The practical result for an investor is a high, regular dividend — but a tax treatment that differs sharply from ordinary stocks.
Qualified dividends from ordinary corporations are taxed at the favorable 0%/15%/20% capital-gains rates. Because a REIT pays no corporate tax, most of its distributions do not qualify and are taxed at your ordinary income rate. A portion may also be a non-taxable return of capital, which lowers your cost basis instead of creating income — ordinary income today can even become capital gain when you sell. REIT dividends paid after 2017 do carry the 20% Section 199A passthrough deduction, which softens the blow by letting you deduct 20% of the dividend before tax.
Reinvested dividends buy more shares, which generate more dividends next year — the engine behind long-run REIT total returns. Taking cash preserves flexibility but surrenders that compounding. Many REITs also offer a direct DRIP with a discount of 1–5% to the market price, which quietly adds to the return.
⚠️ Important: Projections assume dividends and share price grow at a constant rate, which real markets rarely do. REIT dividends are generally taxed as ordinary income, not qualified dividends. This is an educational estimate, not investment advice.