Real Estate Investment Trusts (REITs) are required by law (at least in the U.S.) to maintain a dividend payout ratio of at least 90%. In other words, they are required to pay out at least 90% of their earnings as dividends. The dividend per share is almost the same as the earnings per share.
As a result, the dividend yield (dividends per share / price per share) is related to the price/earnings ratio (P/E ratio). Any REIT that has a favorable dividend yield will also have a favorable P/E ratio.
Allow me to explain further, in a different way:
- Dividend yield = dividend per share / price per share
- P/E ratio = price per share / earnings per share
- In a REIT, dividend per share is almost equal to earnings per share.
With these three facts, we can see that, for a REIT, the dividend yield and the P/E ratio are related to each other.
Using your example, let's say that you find a REIT with a dividend yield of 5%. With no further information on the REIT, we know that the P/E ratio will be between 18 and 20. (It will be 18 if the REIT is paying out 90% of the earnings as a dividend, and 20 if the REIT is paying out 100% of the earnings as a dividend.)
If you find a REIT with a better dividend yield, it will have a better P/E. Let's say you find one with a dividend yield of 10%. The P/E ratio for that REIT will be between 9 and 10. (A lower P/E ratio is better.)