A REIT dividend yield can be higher than a Treasury yield, but the two figures do not represent equivalent income: a Treasury’s quoted yield is tied to a debt security, while a REIT’s indicated dividend yield is an estimate based on a changeable distribution and share price. To compare them fairly, use observations from the same date, choose a Treasury maturity that fits your intended holding period, and assess total return, risk, liquidity and after-tax income—not the yield spread alone.
What the two yields tell you—and what they do not
A yield comparison is a snapshot of indicated income, not a forecast of what you will earn or a verdict on which investment is better. First decide whether you are comparing current income, expected return over a particular period, or stability of principal; those are different questions.
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REIT indicated dividend yield
For a publicly traded equity REIT, a common indicated-yield calculation is its annualized dividend per share divided by its current share price. Label the result an indicated yield: both the share price and the dividend can change, and the company can reduce or suspend its distribution. It is not a guaranteed rate of interest.
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Treasury yield
A Treasury yield refers to a U.S. government debt security or a published Treasury rate series, and you should identify which one you mean. The Treasury’s daily par yield curve is based on closing bid prices for recently auctioned securities; the Treasury says its quotations are indicative, not actual transactions. Constant-maturity Treasury (CMT) rates are interpolated from that curve, so a CMT rate is not a promise that every Treasury security—or every holding period—will deliver that rate. See the U.S. Treasury’s daily interest-rate statistics.
If you hold an individual Treasury to maturity, its quoted yield helps describe the return under the assumptions of that yield calculation. If you sell earlier, the sale price can change with market rates, so your holding-period result may differ. A Treasury fund also differs from an individual bond held to maturity.
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Compare yields on the same date
- Choose the REIT measure. Name the listed REIT or the index, specify whether it covers all REITs or equity REITs, and state the date. For an individual listed REIT, use the indicated annual dividend per share divided by the share price on that date.
- Choose a Treasury maturity. Select and name the maturity that best reflects the period you expect to invest. If using a CMT rate, identify it as an interpolated par yield rather than a guaranteed rate for a particular security.
- Get both figures for that same date. Treasury yields change daily, and a REIT’s indicated yield changes with its price and declared distribution. Do not pair a REIT figure from one date with a Treasury figure from another.
- Calculate the spread in percentage points. Subtract the Treasury yield from the REIT indicated dividend yield. The result is a yield spread, not an expected excess return, a risk adjustment, or a recommendation.
Dated U.S. REIT index illustration
Nareit’s September 2026 snapshot reports a 4.35% dividend yield for the FTSE Nareit All REITs index and 3.93% for the FTSE Nareit All Equity REITs index, with data as of September 30, 2026. These are aggregate index figures, not yields for an individual REIT. To calculate a spread, pair one of them with the Treasury maturity’s rate for September 30, 2026; the index figures alone do not establish which investment is preferable. See Nareit’s REIT market data and commentary and the Treasury rate series.
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Assess whether a REIT distribution is supported
A higher indicated yield deserves scrutiny, not automatic preference. Review the company’s distribution record and whether its real-estate operations can support the payment. Nareit identifies dividend yield as one factor among anticipated total return, payout relative to funds from operations (FFO), management and underlying asset values (Nareit’s REIT investing guide).
- Distribution history: Check the REIT’s filings and announcements for changes in the dividend over time; past payments do not guarantee future ones.
- Payout and cash generation: Compare the distribution with FFO or adjusted funds from operations (AFFO), using the issuer’s definitions and explaining their limitations. FFO is a supplemental measure, not a substitute for financial statements or filings.
- Debt and interest coverage: Examine leverage, debt maturities, financing costs and the company’s ability to meet interest obligations.
- Property and tenant exposure: Consider property type, occupancy, tenant concentration and other business risks that could affect cash flow.
- Management and asset value: Assess the quality of management and the underlying portfolio, rather than relying on yield as a stand-alone signal.
These checks are especially important when comparing two REITs: their property sectors, leverage, tenants, payout measures and management may differ substantially even when their indicated yields look similar.
Account for risk, total return and liquidity
A REIT is an equity investment exposed to business, property, financing and share-price risks. Its distribution can change, and its market price can fall. A Treasury security has different credit and price characteristics; selling before maturity can still expose an investor to price movements. Compare the actual holding-period question, not just the annual income rates.
Historical rate periods do not make the comparison predictable. Nareit reports that REITs had positive total returns in 78% of months with rising Treasury yields from the first quarter of 1992 through the second quarter of 2025. This is a historical statistic across REITs, not a guarantee, a forecast, or proof that any particular REIT benefits when rates rise (Nareit’s historical discussion of REITs and interest rates).
Also distinguish listed REITs from non-traded REITs. Non-traded REITs can have limited liquidity and less transparent market pricing. The SEC warns that distributions may be funded from offering proceeds or borrowings, rather than operating earnings, and says investors should consider total return—capital appreciation plus distributions—instead of focusing exclusively on high distributions. See the SEC Investor Bulletin: Non-traded REITs.
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Compare the after-tax income that applies to you
Pre-tax yields can give a misleading comparison because tax treatment depends on the investment, account and investor. The SEC says REIT dividends generally are treated as ordinary income and do not typically qualify for qualified-dividend tax treatment. The actual character of a distribution and your tax result depend on the issuer’s reporting, your account type and current tax law. This general description is not individualized tax advice (SEC overview of REITs).
Nareit’s September 2026 snapshot characterizes 2025 REIT dividends, on a market-cap-weighted average basis, as 79% ordinary taxable income, 10% return of capital and 11% long-term capital gains. This is an aggregate market statistic, not the tax breakdown for every REIT or investor. Consult the issuer’s tax information and your own circumstances before comparing after-tax income (Nareit’s REIT market data and commentary).
A practical decision framework
- If you need predictable income and principal stability: compare the appropriate Treasury security and maturity, including whether you will hold to maturity. Do not treat a REIT distribution as a substitute for guaranteed interest.
- If you seek equity income and potential appreciation: assess the REIT’s distribution coverage, property and financing fundamentals, price volatility, and potential total return.
- If you may need to sell quickly: account for the liquidity and pricing of the specific investment, especially for non-traded REITs.
- If after-tax cash flow matters: compare expected income under your actual tax and account circumstances, not headline yields.
This is an educational framework, not individualized investment advice. A yield spread by itself cannot establish that a REIT or Treasury is the better choice.
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