Which of the following is a characteristic of Dividends paid by REITs?

Dividends paid by REITs are primarily distributed from the income generated from the properties they own and manage. This characteristic stems from the structure of REITs, which are required to distribute at least 90% of their taxable income as dividends to maintain their status as a Real Estate Investment Trust. This distribution policy allows investors to receive income that reflects the cash flow produced by the underlying real estate holdings. The income can come from various sources, including rents collected from tenants, interest on mortgages, or profits from property sales.

Understanding this mechanism highlights the significance of the rental income and the performance of the properties in determining the dividends paid to shareholders. As a result, investors often look at a REIT's portfolio and its occupancy rates, rental growth, and overall operational performance as crucial indicators of its ability to maintain or increase dividend payments over time.

The other options do not accurately describe the nature of REIT dividends, which emphasizes why this choice is the most correct in portraying a fundamental aspect of how dividends function within the framework of REITs.