If you're interested in real estate investment trusts (REITs), you'll likely run across the acronym FFO. It's important to understand what a REIT's FFO tells you. Think net income or operating income, sort of. With most companies, net income is a useful number to evaluate, reflecting the profits left over from sales after all expenses have been subtracted. With REITs, though, net income isn't as meaningful. (Remember, REITs are Real Estate Investment Trusts, special kinds of corporations that must pay out at least 90% of their taxable income in dividends.)
According to accounting rules, the value of REIT properties is decreased over time, with depreciation charged against net income, reducing it. In reality, however, these properties are probably not falling in value, and may even be appreciating. So, a REIT's net income tends to understate its health. This is why, with REITs, you should look at the "funds from operation," or FFO, instead. The FFO ignores the effect of depreciation and other non-cash charges to help you see a REIT's true performance.
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Finally, here are some recent articles about specific REITs: