It's no secret that real estate investment trusts have put a glimmer in investors' eyes over the past few years, as the economic downturn reduced even normally generous dividend streams to a trickle. The sector is so hot that CBS Corp. (PARA -0.16%) recently saw its stock spike up 10% after announcing its plans to revamp its billboard business into a REIT.

Outdoor advertisers aren't the only ones jumping on the REIT bandwagon. Two Harbors (TWO -0.77%) just recently spun off its single-family home portfolio into a new REIT named Silver Bay Realty Trust (NYSE: SBY). So far, the new REIT has made quite an impression on investors, and it made me wonder: How might this newbie's performance stack up against another popular REIT, the venerable Annaly Capital Management (NLY 0.10%), particularly in the dividend area?

Different angles on housing
While both are REITs, with all of the dividend power and special tax status that fuels that power, and both are tied to the housing market, the similarities end there. Annaly, like its fellow American Capital Agency, invests primarily in mortgage-backed securities backed by Fannie Mae and Freddie Mac. This has put these mREITs in a vulnerable position as the Fed continues its quantitative easing program. Since Annaly holds the largest concentration of these MBSes in the mREIT world, it has been hit pretty badly.

Not surprisingly, Annaly's dividend has been in a downward spiral for the past couple of years. With QE3 still in full force, the outlook for a dividend increase for this battered mREIT looks dim indeed.

While the housing bust has had a detrimental effect on mortgages and interest rates, causing pain for the mREIT sector, it was a golden opportunity for entities like Silver Bay. As private investors snapped up distressed single-family homes for a song, a new enterprise was born, which is well-represented in this newcomer. The glut of foreclosures has created an industry whereby single-family rentals are becoming the new normal.

With rents still on the rise in most U.S. cities, there seems no downside to this business. Even the housing rebound should help entities like Silver Bay. According to Trulia, many young people do in fact plan to buy a home -- probably within the next two years. As home prices rise, the profit margin on these fixed-up homes should be phenomenal, as they move from the rental to the sales market -- and provide new capital to start the cycle all over again.

One Fool's take
While Annaly's 12% dividend yield may be tough for Silver Bay to top from the get-go, investors looking for longer-term dividend stability and growth may find Silver Bay the better pick of the two. Some big-time investors apparently feel the same way: Billionaire Steve Cohen recently purchased quite a bit more of Colony Financial (NYSE: CLNY) in the last quarter of 2012. That REIT, of course, is stepping up its own presence in the single-family rental space.

Is Annaly dead in the water, then? Not at all. But for the coming year, I don't see a whole lot of upside to that particular company. Things will change as the economy as a whole, and housing in particular, continue to improve, but it may take another year or two. Meanwhile, for yield-starved investors, there is Silver Bay, which may very well represent a juicy long-term bet, as well.