Real Estate Investment Trusts (REITs) are companies that own or finance income-producing real estate — apartments, office towers, data centers, cell towers, warehouses, and shopping centers. By law, a REIT must pay out at least 90% of its taxable income as dividends, which is why investors buy them: not for explosive growth, but for a steady, high-yield stream of passive income. The trouble is that two REITs can both yield 5% and still be wildly different in value, safety, and long-term return.
This REIT calculator turns four raw numbers — share price, annual dividend per share, Funds From Operations (FFO) per share, and your planned investment — into the metrics that actually matter: the dividend yield, the price-to-FFO valuation multiple, your annual dividend check, and a 5-year projected value that assumes every dividend is reinvested at that year's price.
How to Use
- Enter the Share Price — what one share costs on the exchange right now.
- Type the Annual Dividend per Share — the total cash dividend paid over the trailing twelve months. Most equity REITs pay quarterly, so multiply the quarterly check by four.
- Add FFO per Share. FFO (Funds From Operations) is the REIT industry's preferred earnings figure: net income plus real-estate depreciation, minus gains on property sales. It strips out accounting depreciation that does not actually reduce cash coming in the door.
- Set your Dividend Growth Rate — how fast you expect the payout to rise each year. Mature, high-quality REITs typically grow 3%–8% annually.
- Set your Share Price Appreciation assumption — the expected annual rise in the stock price itself, separate from dividends.
- Enter your Initial Investment to see exactly how many shares you would buy, what your first-year dividend check would be, and how the position could compound over five years if every payout is reinvested.
The result card shows your dividend yield (the income you earn as a percentage of what you paid), the P/FFO multiple (the REIT equivalent of a P/E ratio), your annual dividend income, and a five-year projected value with dividend reinvestment.
The Numbers Behind a REIT
Dividend yield is the single most quoted REIT metric:
Yield = Annual Dividend per Share ÷ Share Price
A REIT trading at $45.00 that pays $2.20 per year yields 4.89%. By comparison, a 10-year Treasury pays roughly 4%–5%, so the REIT offers little extra income unless it can grow the dividend and the principal.
Price-to-FFO (P/FFO) is the valuation multiple REIT analysts use instead of the traditional price-to-earnings ratio:
P/FFO = Share Price ÷ FFO per Share
If a share costs $45 and the REIT generates $3.00 of FFO per share, the multiple is 15.0. A P/FFO of 15–20 is normal for healthy U.S. equity REITs; a single-digit P/FFO can signal either a deep bargain or a business in trouble, and a multiple above 25 usually means investors are pricing in aggressive growth.
Dividend reinvestment is where the compounding happens. Each year, the cash dividend you receive buys additional shares at whatever the price is that year. Those new shares then earn their own dividends the following year, and the effect snowballs — which is why the 5-year projection assumes reinvestment rather than you pocketing the cash.
Examples
Example 1 — A core diversified REIT at a fair price. You invest $10,000 in a REIT at $45.00 per share that pays $2.20 annually and generates $3.00 of FFO per share. The yield is 4.89%, the P/FFO is 15.0, and your $10,000 buys 222.22 shares paying about $488.89 in dividends in year one. Assuming a 5% dividend growth rate and 3% price appreciation, reinvesting every payout grows the position to roughly $14,924 after five years — a gain of about $4,923 without you adding another dollar.
Example 2 — No growth, pure income. If you believe a REIT's dividend and share price will simply hold flat, set both growth rates to 0%. On the same $10,000 at $45.00 and $2.20 dividend, the yield stays 4.89% and reinvestment slowly accumulates fractional shares, pushing the five-year value to about $12,695. Most of that gain is just compounding the 4.89% yield.
Example 3 — A seven-figure institutional allocation. On a $1,000,000 position in a REIT at $50.00 paying a $3.00 dividend (6.00% yield) with $3.50 of FFO, the P/FFO is 14.29 and the first-year dividend is $60,000. With 4% dividend growth and 3% price appreciation, reinvestment lifts the portfolio to roughly $1,564,366 after five years. At this scale the reinvestment math matters enormously: a 1% change in the growth assumptions shifts the five-year outcome by tens of thousands of dollars.
FAQ
What is a good REIT dividend yield?
A good starting yield for a healthy U.S. equity REIT is usually 4%–8%. Yields above 8% often carry a red flag: the market may expect a dividend cut, higher interest rates, or deteriorating property fundamentals. Always pair the yield with the P/FFO multiple and the payout history before buying.
What is FFO and why does it matter more than net income?
Funds From Operations (FFO) adds real-estate depreciation back to net income and removes gains or losses on property sales. REIT buildings wear down, but they often rise in market value, so GAAP depreciation understates the cash a property actually throws off. Wall Street values REITs on FFO per share, not on earnings per share.
Is the 90% dividend rule true for every REIT?
To keep its pass-through tax status, a REIT must distribute at least 90% of its taxable ordinary income to shareholders each year. This is why REITs pay such high yields, but it also means they have little retained cash for growth and must borrow or issue shares to expand.
Are REIT dividends taxed at a lower rate?
Most REIT dividends are taxed as ordinary income rather than the lower qualified-dividend rate, because REITs themselves pay little corporate tax. A portion may qualify as a return of capital (deferring tax until you sell) or as capital-gain distributions. Check the REIT's annual 1099-DIV breakdown in tax season.
Does the calculator account for fees, taxes, and inflation?
No. The projection is a simple reinvestment model that ignores brokerage fees, fund expenses, dividend taxes, and inflation. Treat it as an illustration of how yield and growth compound — not as a net-of-tax forecast.
What happens if interest rates rise?
When Treasury yields climb, the income advantage of a high-yield REIT shrinks, and REIT share prices usually fall. The calculator lets you stress-test this: lower the Share Price Appreciation assumption to 0% or even a negative number to see how a rate-driven sell-off changes your five-year outcome.
Disclaimer
This REIT calculator is provided for informational purposes only and does not constitute investment, tax, or financial advice. Projected values are mechanical estimates based on the growth assumptions you enter; dividends can be cut, share prices can fall, and past performance does not guarantee future results. FFO and yield figures are based on the inputs you supply. Always research a REIT's latest 10-K, supplemental, and dividend history, and consult a licensed investment advisor before committing capital.