How to evaluate any REIT
Standard metrics: dividend yield, funds from operations (FFO) per share, AFFO, price-to-FFO, payout ratio, net debt/EBITDA, and the quality of the underlying portfolio.
FFO (funds from operations) is the REIT equivalent of earnings per share — it adjusts for real-estate-specific accounting. AFFO subtracts recurring capex and is the closest measure of cash that can actually be paid out as dividends.
Standard ranges: yields of 3–7%; price-to-FFO from 12x in struggling sectors to 25x+ in data centers; payout ratio under 90% for safe dividend coverage; net debt to EBITDA under 6x is conservative, above 8x is aggressive.
The underlying portfolio matters as much as the metrics. Trophy assets in supply-constrained markets vs. commodity assets in oversupplied ones is the difference between a great REIT and a value trap that looks cheap.