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 beat the market by 18 percentage points on average (discover the secrets of this strategy here).
For our take on five diversified REITs with dividend yields exceeding 9%, read on.
Apollo Commercial Real Est. Finance Inc (NYSE:ARI) starts us off with the lowest dividend yield on our screen, leveling in at 9% (the word “lowest” used relatively). Apollo Commercial Real Est. Finance Inc (NYSE:ARI) 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. ARI 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 Commercial Real Est. Finance Inc (NYSE:ARI) in his portfolio (check out the fund’s positions here).
Annaly Capital Management, Inc. (NYSE:NLY) provides investors with an extremely high yield of 12.5%, coming in the form of quarterly payments of $0.45-$0.55. Annaly Capital Management, Inc. (NYSE:NLY) 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 Capital Management, Inc. (NYSE:NLY) that are subject to low mortgage rates have taken a hit (NLY 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 NLY 10% away from their expectations. Billionaire Howard Marks of Oaktree Capital Management keeps nearly 13.2mm shares (see his top picks here).
American Capital Mortgage Investment Crp (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 American Capital Mortgage Investment Crp (NASDAQ:MTGE)’s most recent earnings announcement on May 3rd to come in below expectations, underlined by a big mark-to-market loss of $1.66/share on those securities.
Billionaire Israel Englander of Millennium Management has about $15.5mm invested in American Capital Mortgage Investment Crp (NASDAQ:MTGE) (take a look at his top five stocks here).
Where else can huge yields be found?
Capstead Mortgage Corporation (NYSE:CMO) is a $1.2bn 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 Mortgage Corporation (NYSE:CMO) 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 CMO (caused by the Fed announcing its intent to taper off MBS purchases soon) could be a great buying opportunity. On a grander scale, however, CMO is still up 9.5% on the year. Billionaire Ken Griffin of Citadel Investment Group owns 1.4mm shares of CMO (read about his other positions here).
AG Mortgage Investment Trust Inc (NYSE:MITT) grabs the last spot on our screen with a yield of 12%. AG Mortgage Investment Trust Inc (NYSE:MITT) 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 Investment Trust Inc (NYSE:MITT) 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 $7mm worth of MITT (check out the fund’s positions here).
Disclosure: none
