Many investors have recently fled from high dividend paying real estate investment trusts (REITs), worried rising rates would cripple the businesses and hurt the bottom lines.

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Yet recent research reveals over the last 33 years in the 135 months when the yield on U.S. Treasury Bills have risen, it turns out REITs have outperformed the market as a whole. In fact investment firm Cohen & Steers notes, "although rising interest rates can impact real estate values and the performance of REITs, higher interest rates do not necessarily lead to poor REIT performance." 

This will likely mean big things to the diversified and attractive operations of Realty Income (NYSE:O), Health Care REIT (NYSE:WELL) and Digital Realty Trust (NYSE:DLR), which all offer compelling reasons to consider an investment. Especially knowing part of the reason for historical outperformance was the reality rising rates often indicate an improving economy, which will ultimately cause more companies to expand and seek the property and assets provided by REITs. 

In video below, Fool contributor Patrick Morris speaks to why investors should always keep that in mind when considering an investment in a REIT, but it also shouldn't be used broadly to jump into any and every REIT out there. 


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.