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Like the traditional dividend paying regular stocks, REITs also follow the same rule. The more information you have, the better your analysis will be. In that aspect, your primary focus is to consider only public REITs for investment. The public REITs are SEC regulated and provides you with easily assessable public information like quarterly and annual reports. Public REITs also file quarterly Form 10-Q and annual Form 10-k reports with the SEC.
One quality to look out for when investing in a REIT is its completive advantage.
The next critical section to go through is risk factors. Here, you get a summary of the main risk and details about each risk. This is crucial for REIT investing as you want to know if you will consistently receive dividends throughout your investing period.
We must make a critical point about Form 10-Q and Form 10-K. Public companies try to endure that they do not make statements that could land them in trouble in the future. When making these filings, the company will try to be a defensive as possible.
At face value, this is a scary thought. A REIT being unable to pay dividends would spell disaster for us as investors. However this is typical language that you will find in a 10K form. Companies will do anything they can to manage investor expectations.
That is why before deciding whether to invest in a REIT, it is critical to consider its qualities and quantitative characteristics. Then evaluate the risk and determine if this is acceptable enough for you to invest your company.
The other sections you should go through are legal proceedings to see if the company is involved in any current lawsuits. You should also look at Management’s discussion and analysis which is where you will find the most up to date commentary on business activities.
