3 Top REITs to Buy as Interest Rates Fall

Here are three real estate investment trusts (REITs) to consider amid falling interest rates.

Real estate investment trusts ( REITs ), or companies that own, operate, or finance income-producing real estate, tend to outperform when interest rates fall.

These investment vehicles, which must pay out 90% of their taxable income as dividends, offer yields that become more appealing as Treasury and corporate bond yields fall. Their valuations can rise because the 10-year Treasury yield is the benchmark for discounting future cash flows from REITs, so as it falls, REIT cash flows improve, boosting valuations. Lower borrowing costs are another tailwind, because REITs fund operations through long-duration debt, which can be refinanced at more favorable rates, boosting profitability.

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