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Investing in REITs: Real Estate Investment Trusts, 4th Edition by Ralph L. Block

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The Dynamics of FFO/AFFO Growth

One of the attractive attributes of a REIT, compared with other higher-yielding investments like bonds and preferred stocks, is their significant long-term capital appreciation potential and increasing dividends. If a REIT is viewed as having virtually no capacity to grow its FFO, AFFO, or dividend, its shares would be bought only for yield. Because of the ease with which the dividend can be cut or eliminated, the yields of growth-challenged REIT stocks would normally be higher than those of most bonds and preferred stocks, and their prices might be closely correlated with high-yield (or “junk”) bonds.

We can sometimes find REITs that do trade as bond surrogates because of investor perception that they have very ...

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