The 25 Highest-Yielding REITs

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.

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."

Dan Dzombak's musings and articles he finds interesting can be found on his Twitter: @DanDzombak. He does not own any of the stocks mentioned in this article.

The Fool owns shares of Annaly Capital Management. 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.


Read/Post Comments (4) | Recommend This Article (27)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 31, 2011, at 8:29 PM, neamakri wrote:

    Thank you for the data. I had tracked all of these except STWD, so that is now on my tracking too.

    Most of these are very risky or poor investments except as follows: these four: CIM, TWO, RSO, and DX are a little risky but pay well. UHT pays less, but has paid reliable dividends for 23 years, so should have much less risk.

    Overall, REIT's should do well as long as the FED is loaning money for "free". When that changes, we fools can reevaluate our positions.

  • Report this Comment On February 01, 2011, at 4:00 PM, oilsands wrote:

    Why did you choose 300 million as the market cap cutoff? 100, or 500, or 1 billion would look like a usual choice, not 300?

  • Report this Comment On February 04, 2011, at 9:17 PM, vkmo wrote:

    You didn't include HIX, KHI, HIO and ZTR etc.

  • Report this Comment On February 13, 2011, at 2:47 PM, gemike wrote:

    CWH occupancy of office buildings is extremely high and tenents tend to be doctors, dentists, CPA's, insurance firms, and other professionals not likely to move or go out of business. This high occupancy seems to be overlooked by so called experts looking at this stock and the high dividend would seem to be most secure in this down market and CWH is well diversified and expanding for the future. It definitely is worth checking out.

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