On REITs and Pass Through Entities

“Good judgement is the result of experience and experience the result of bad judgement.” Mark Twain

I’ve been investing in Dividend Growth Stocks for roughly two decades or so as of the time of this writing. I do not even want to date myself by telling you how long I’ve followed financial markets. Unfortunately, you have to suffer through my old man rants as a result.

I’ve reviewed a lot of investments, both ones I have made, ones I avoided and ones that are evident in hindsight. I’ve noticed a common pattern amongst pass through entities, such as REITs, MLPs etc.

Many of these entities have a special tax provision, which allow them to avoid corporate taxation and pass through most of their income to shareholders. Note that most of these entities (broadly speaking of course) are believed to have stable, fee earning income, that can support said distributions. In general, these distributions are dependable.