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Anonymous

18 Apr 2019

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General Investing

How does higher interest rates affect REITs?

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REITs tend to take on debt to boost their returns and so they incur interest only expense. A higher interest rate will increase the interest expense and thus decrease the cash flow available to pay shareholders. A reduced dividends, decreases the dividend yield thus affecting the share price negatively. Additionally when interest rates rise, the interest yield on REITs rise, thus the value of REITs fall.

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