As the title suggests, I have constructed a double digit (16 percent) yielding portfolio of both debt and equity REITs. The stocks selected for this purpose are ARMOUR Residential REIT, Inc. (NYSE:ARR), Inland Real Estate Corporation (NYSE:IRC), and Whitestone REIT (NYSE:WSR). The reason for selecting these stocks is that they pay dividends on a monthly basis. Since bills and expenses incur on a monthly basis, investors seeking monthly income should evaluate them as possible source of regular income to cover their monthly expenses. Besides elevated dividends, each of the stocks presents potential for capital appreciation.
| Dividend Yield (%) | Capital Appreciation (%) | Total Return (%) | |
| ARR | 13.5 | 8.0 | 21.5 |
| IRC | 6.2 | 8.0 | 14.2 |
| WSR | 8.0 | 5.1 | 13.1 |
| Portfolio | 9.2 | 7.0 | 16.3 |
Each of the aforementioned stocks is given equal weights within the portfolio. The constructed portfolio offers a dividend yield of 9.2%, with 7% potential of capital appreciation. Therefore, income-oriented investors can expect a total return of 16.3% from this portfolio. The rese of this article briefly discusses the business models and asset holdings of each of the companies under consideration.
Armour Residential invests primarily in hybrid ARM and fixed rate residential mortgage backed securities that are guaranteed by any government sponsored agency. Looking at the current situation where the Fed is committed to purchasing Agency MBS, the shareholders of Armour Residential approved and amended the company’s charter to include non-Agency in the MBS portfolio. This flexibility will allow management to drive the company smoothly through the current challenging environment. At the end of the third quarter, the company was exclusively invested in Agency MBS. However, given the situation, I believe the addition of high yielding non-Agency MBS will benefit Armour Residential by expanding its net interest margin.
The stock currently offers a dividend yield of 13.5% and is trading at 10% of its third quarter book value. Analysts have a consensus mean price target of $7.70 for the stock, which is currently selling at $7.13. This means an upside of 8%.
Inland Real Estate Corp (IRC)
Inland happens to be a small cap equity REIT with a market cap of $825 million. It invests, owns, and manages single tenant retail properties and shopping centers and has a large concentration in the Midwestern region of the United States. Around 60% of the company’s properties are in the Chicago region.
The company distributes $0.475 per common share with an annual dividend yield of 6.16%. Analysts have a consensus mean price target of $10 for Inland, which is currently trading at $9.25 per share. This is an upside of 8%.
Whitestone REIT
Whitestone REIT is another equity REIT with a market cap of $242 million that invests and manages Community Centered Properties. These are visibly high quality properties in established culturally diverse locations. Whitestone’s properties may be of benefit to retail, groceries, restaurant, healthcare, educational and financial services.
The stock currently offers a dividend yield of 8%, coupled with 5.14% capital appreciation potential. The consensus mean price target for Whitestone is $15.13, while it is currently trading at $14.39 per share.
The article Your 16% Monthly Yielding Portfolio originally appeared on Fool.com and is written by Adnan Khan.
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