6 REITS That Have Enough Earnings to Back Their Dividends REITs (real estate investment trusts) are investment vehicles that invest in real estate and|or mortgages. The investments produce real estate income and|or interest, 90% of which must be paid out as dividends to shareholders. That allows the REIT to not have to pay taxes. REITs produce funds from operations (FFO), which is different from GAAP net income in two major respects. The two major differences are (1) adding back both depreciation and amortization expenses, and (2) adding back certain compensation expenses as well. In other words, FFO is somewhat like EBITDA (earnings before interest, taxes depreciation, and amortization). However, interest expenses, which are added back to EBITDA along with taxes, are not added back into FFO and there are no taxes. It is a form of cash flow, although not as clean as free cash flow, which also includes working capital movements and deducts capital spending. Nevertheless, FFO allows investors to understand how well the company can afford to cover its dividend from a cash flow standpoint.