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, or REITs. 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.

A few months ago, I ran a screen for the highest-yielding REITs, and it got such a good reception that I'm doing it again this quarter. This time, I'm only considering REITs with a market cap greater than $300 million.

Here are the top 25 highest-yielding REITs the screen produced:


Company Name

Market Cap (millions)

Dividend Yield


American Capital Agency (Nasdaq: AGNC) $6,478 19.4%


Chimera Investment (NYSE: CIM) $2,763 19.3%


ARMOUR Residential REIT (NYSE: ARR) $602 18.6%


Resource Capital (NYSE: RSO) $432 18.0%


Invesco Mortgage Capital (NYSE: IVR) $1,697 17.7%


Two Harbors Investment $1,309 17.2%


CYS Investments $1,103 15.0%


Hatteras Financial $2,044 15.0%


Annaly Capital Management $15,638 14.9%


MFA Financial $2,433 14.6%


Anworth Mortgage Asset $870 14.2%


Capstead Mortgage $1,062 14.1%


Newcastle Investment $483 13.1%


Crexus Investment $752 12.2%


Dynex Capital $376 12.0%


CommonWealth REIT $1,399 12.0%


PennyMac Mortgage Investment Trust $468 11.9%


Sabra Health Care REIT $403 11.7%


NorthStar Realty Finance $432 11.1%


Starwood Property Trust $1,736 9.5%


Redwood Trust $851 9.3%


Colony Financial $497 8.6%


Omega Healthcare Investors $1,941 8.5%


Medical Properties Trust $1,042 8.5%


Hospitality Properties Trust $2,745 8.1%

Source: S&P Capital IQ.

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.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.