The 25 Highest-Yielding REITs (AGNC, CIM, CYS, HTS, IVR, NLY)
January 31, 2011 | Comments (3)
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The 25 Highest-Yielding REITs
January 31, 2011 | Comments (3)
Dividend investing is popular again. Investors have taken to heart Jeremy Siegel's studies, which show that higher-yielding stocks tend to offer greater returns over time than low- or no-yield stocks.
The highest dividend yields can be very tantalizing. As long as a stock yielding 15% doesn't lose value, you'll make 15% in one year! In more cases than not, however, an astronomical yield is a bad sign for a stock. Since dividend yields and stock prices move in opposite directions, a high yield usually means that investors have begun to worry about the business, and driven down its stock price.
Most real-estate companies are organized as real-estate investment trusts. They do this so that they can get around the double taxation issue that most investors face. REITs don't pay taxes as long as they distribute at least 90% of their income as dividends. The investor holding shares of the REIT then has to pay taxes on those dividends as though they are income. This differs from most dividends which are taxed at a lower rate.
Most real-estate companies are organized as real-estate investment trusts. They do this so that they can get around the double taxation issue that most investors face. REITs don't pay taxes as long as they distribute at least 90% of their income as dividends. The investor holding shares of the REIT then has to pay taxes on those dividends as though they are income. This differs from most dividends which are taxed at a lower rate.
Dividends are not guaranteed; you need to make sure that a business is generating enough cash to pay its dividend, or your investment could be disastrous.
Three months ago, I ran a screen for the highest-yielding real-estate stocks, and it got such a good reception that I'm doing it again this quarter. The limitations I've set this time are that I'm only considering REITs that must have a market cap greater than $300 million.
Here are the top 25 highest-yielding REITs the screen produced:
Company | Market Cap (millions) | Div. Yield | |
|---|---|---|---|
1 | American Capital Agency (Nasdaq: AGNC) | $2,532 | 19.5% |
2 | Cypress Sharpridge Investments (NYSE: CYS) | $752 | 18.4% |
3 | Invesco Mortgage Capital (NYSE: IVR) | $1,089 | 17.3% |
4 | Chimera Investment (NYSE: CIM) | $4,234 | 16.2% |
5 | Two Harbors Investment (NYSE: TWO) | $407 | 15.9% |
6 | Annaly Capital Management (NYSE: NLY) | $12,599 | 14.4% |
7 | Hatteras Financial (NYSE: HTS) | $1,601 | 14.0% |
8 | Resource Capital (NYSE: RSO) | $405 | 13.9% |
9 | Anworth Mortgage Asset (NYSE: ANH) | $831 | 12.8% |
10 | Capstead Mortgage (NYSE: CMO) | $890 | 12.3% |
11 | MFA Financial (NYSE: MFA) | $2,318 | 11.4% |
12 | Walter Investment Management (NYSE: WAC) | $469 | 11.0% |
13 | Dynex Capital (NYSE: DX) | $314 | 10.1% |
14 | PennyMac Mortgage Investment Trust (NYSE:PMT) | $309 | 9.2% |
15 | NorthStar Realty Finance (NYSE: NRF) | $394 | 7.8% |
16 | Sun Communities (NYSE: SUI) | $678 | 7.7% |
17 | Investors Real Estate Trust (Nasdaq: IRET) | $711 | 7.7% |
18 | CommonWealth REIT (NYSE: CWH) | $1,896 | 7.6% |
19 | Medical Properties Trust (NYSE: MPW) | $1,193 | 7.4% |
20 | Hospitality Properties Trust (NYSE: HPT) | $3,029 | 7.3% |
21 | Starwood Property Trust (NYSE: STWD) | $1,592 | 7.2% |
22 | Getty Realty (NYSE: GTY) | $914 | 6.9% |
23 | Omega Healthcare Investors (NYSE: OHI) | $2,173 | 6.7% |
24 | Universal Health Realty Income Trust (NYSE:UHT) | $451 | 6.7% |
25 | Cogdell Spencer (NYSE: CSA) | $305 | 6.7% |
Source: Capital IQ, a division of Standard & Poor's.
These stocks are a good place to start your research, but they're not formal recommendations. Remember, their seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket -- no matter how tempting the dividends are.
For a basket of some high-yield some dividend opportunities, click here to get The Motley Fool's five-page free report: "13 High-Yielding Stocks to Buy Today."
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