5 Diversified REITs With Monster Yields Over 9%

Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Real estate investment trusts are no strangers to paying high dividend yields, as their incorporation and tax structures entitle them to deduct dividends paid to owners, significantly dodging a large U.S. federal income tax bill every year. Investors looking for high yields shouldn’t turn a blind eye to this industry, and gems with yields north of 9% can be found with a little digging.

We pay attention to yields, insider transactions, hedge fund sentiment, and a number of other parameters in our proprietary strategy that has beaten the market by 18 percentage points on average.

For our take on five diversified REITs with dividend yields exceeding 9%, read on.

Apollo Commercial Real Estate Finance (NYSE: ARI) starts us off with the lowest dividend yield on our screen, leveling in at 9% (the word “lowest” used relatively). Apollo prefers loan investing to real property, acquiring commercial loans, CMBS, and mezzanine financings. The company started May off with a significant earnings beat of $0.10 over estimates, displaying quarterly growth in both revenue and earnings. Apollo also showcases the highest P/E multiple on our list, with the trailing metric coming in at 11.

Billionaire Jim Simons of Renaissance Technologies has over a million shares of Apollo in his portfolio.

Annaly Capital Management (NYSE: NLY)
provides investors with an extremely high yield of 12.5%, coming in the form of quarterly payments of $0.45-$0.55. Annely prefers to invest in financing vehicles as well, including pass-through certificates and CMOs. As the U.S. real estate market has recovered, stocks like Annaly that are subject to low mortgage rates have taken a hit (Annaly is down 16% stretching back twelve months). Higher Treasury yields have also prompted selling in mortgage REITs recently.

Analysts are encouraging to buy on this dip, however; one year price targets put Annaly 10% away from their expectations. Billionaire Howard Marks of Oaktree Capital Management keeps nearly 13.2 million shares.

American Capital Mortgage Investment (NASDAQ: MTGE)
takes the top spot on our list with a gargantuan dividend yield of 16.3%. As its name and ticker would suggest, MTGE invests in mortgage-related assets and has been subject to the same decline in price per share as NLY due to increasing Treasury yields. Agency MBS prices also declined in Q1, causing MTGE’s most recent earnings announcement on May 3 to come in below expectations, underlined by a big mark-to-market loss of $1.66 per share on those securities.

Billionaire Israel Englander of Millennium Management has about $15.5 millioninvested in MTGE (take a look at his top five stocks here).

Where else can huge yields be found?

Capstead Mortgage Corp. (NYSE: CMO)
is a $1.2 billion REIT invested in pass-throughs as well, although it specializes primarily in adjustable-rate mortgages issued and guaranteed by Fannie Mae or Freddie Mac. Capstead provides investors with a yield of slightly over 10%, paid quarterly in a range of $0.30 to $0.40. Both KBW and RBC Capital are saying the recent dip in Capstead (caused by the Fed announcing its intent to taper off MBS purchases soon) could be a great buying opportunity. On a grander scale, however, Capstead is still up 9.5% on the year. Billionaire Ken Griffin of Citadel Investment Group owns 1.4 million shares of Capstead.

AG Mortgage Investment Trust, Inc. (NYSE: MITT)
grabs the last spot on our screen with a yield of 12%. AG Mortgage overshadows the other stocks on our list with its excellent performance going back a year; the stock has appreciated by 19% (although still less than the overall market’s gain of 26%). The same issues in the Treasury and mortgage markets have caused a small pullback for AG Mortgage as well, but less exaggerated than some of the other REITs. The company revealed a miss in its most recent earnings report at the start of May, highlighting a decline in EPS of 36% versus the same quarter a year prior.

Billionaire Leon Cooperman of Omega Advisors owns about $7 million worth of MITT (check out the fund’s positions here).

There’s no question Annaly Capital’s double-digit dividend is eye-catching. But can investors count on that payout sticking around? With the Federal Reserve keeping interest rates at historically low levels, Annaly has had to scramble to defend its bottom line. In The Motley Fool’s premium research report on Annaly, senior analysts Ilan Moscovitz and Matt Koppenheffer uncover the key challenges the company faces and divulge three reasons investors may consider buying it. Simply click here now to claim your copy today!


This article is written by Eric Winter and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus