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Investors aiming to boost their investment income may find real estate investment trusts (REITs) attractive.
REITs own or finance income-generating real estate such as office buildings, apartments or retail centers. By collecting rental income or loan interest, REITs can provide shareholders with consistent dividend payouts.
REITs offer a compelling tax advantage for income investors. To maintain their special tax status, REITs must distribute at least 90% of their taxable income to shareholders annually. This requirement allows REITs to avoid paying corporate income taxes.
High-yielding REITs can be attractive but aren’t always a sure bet. Investors should analyze a company’s fundamentals to ensure its high dividend is sustainable. Beyond yield, factors such as valuation, management team, balance sheet strength and growth prospects are equally important.
Take a look at these 10 high-yield REITs selected by Sure Dividend to see whether they’re a fit for your portfolio:
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Orchid Island Capital Inc. (NYSE:ORC) is a mortgage REIT that specializes in residential mortgage-backed securities. These securities are backed by various home loans and generate income for the company.
In the second quarter of 2024, Orchid Island reported a net loss of $5 million or $0.09 per share, falling short of analyst estimates. While the company’s revenue declined significantly year over year, it exceeded expectations.
Despite the net loss, Orchid Island continued distributing dividends to shareholders, paying $0.36 per share during the quarter. As of June 30, the company’s book value per share was $8.58.
Two Harbors Investment Corp. (NYSE:TWO) is a REIT that specializes in residential mortgages. The company primarily invests in residential mortgage-backed securities, mortgage loans, mortgage servicing rights and commercial real estate.
Two Harbors generates most of its revenue through interest income from its available-for-sale securities.
Two Harbors reported earnings per share of $0.17 during the second quarter, missing analyst estimates by $0.27. Revenue for the quarter was negative $38.25 million, down 8.48% year over year.
Despite challenging market conditions, Two Harbors maintained a stable book value of $15.19 per share and declared a second-quarter dividend of $0.45 per share. For the first half of 2024, the company generated a 5.8% total economic return on book value.
Two Harbors reported a comprehensive income of $500,000 and repurchased $10 million in convertible senior notes.
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Armour Residential REIT (NYSE:ARR) primarily invests in residential mortgage-backed securities issued by government-sponsored entities like Fannie Mae, Freddie Mac and Ginnie Mae. The securities are backed by various types of home loans, including fixed-rate, hybrid adjustable-rate and adjustable-rate mortgages. Armour may also invest in unsecured notes, bonds, money market instruments and other nongovernment agency-backed securities.
Armour reported a GAAP net loss of $51.3 million in the second quarter or $1.05 per share. However, the company generated net interest income of $7 million and distributable earnings of $52.5 million or $1.08 per share.
During the quarter, Armour paid a monthly dividend of $0.24 per share, totaling $0.72. The company’s average interest income on assets was 5%, while its interest cost on liabilities was 5.52%. This resulted in an economic interest income of 4.74% and a net interest spread of 2.05%.
Dynex Capital Inc. (NYSE:DX) primarily invests in mortgage-backed securities on a leveraged basis. The company focuses on both agency and non-agency mortgage-backed securities.
On July 22, Dynex reported a comprehensive loss of $0.31 per common share, representing a 2.4% decrease in book value. As of June 20, the book value per common share was $12.50.
The company also reported a comprehensive loss of $0.18 per share and a net loss of $0.15 per share. Despite the losses, Dynex declared a dividend of $0.39 per common share for the second quarter.
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Ellington Credit Co. (NYSE:EARN) is a financial firm that invests in residential mortgage and real estate assets. The company primarily invests in mortgage-backed securities backed by the U.S. government or government-sponsored enterprises.
On Aug. 12, Ellington Residential reported a net loss of $800,000 or $0.04 per share. However, adjusted distributable earnings reached $7.3 million or $0.36 per share, sufficient to cover the dividend paid during the quarter.
Ellington’s net interest margin was 4.24%. At the end of the quarter, the company held $118.8 million in cash and cash equivalents, along with $44 million in other unencumbered assets.
AGNC Investment Corp. (NASDAQ:AGNC) is a mortgage REIT that primarily invests in agency mortgage-backed securities using leverage. The company’s investment portfolio includes residential mortgage pass-through securities, collateralized mortgage obligations and non-agency mortgage-backed securities, many of which are backed by government-sponsored enterprises.
On July 22, AGNC reported a comprehensive loss of $0.13 per common share, including a net loss of $0.11 per share and an additional $0.02 per share in other comprehensive losses.
The company’s net spread and dollar roll income per common share was $0.53, excluding a $0.02 per share benefit from a catch-up premium amortization adjustment. As of June 30, AGNC’s tangible net book value per common share was $8.40, a decrease of 5% from the previous quarter.
Ares Commercial Real Estate (NYSE:ACRE) specializes in commercial real estate loans. Last year, the company generated about $198.6 million in interest income.
On Aug. 6, Ares Commercial reported a decline in second-quarter earnings. Interest income fell 21% to $40.98 million because of challenges in the commercial real estate market, including rising inflation and the impact of remote work trends.
Despite a 2% increase in interest expense to $27.5 million, total revenue decreased by 33% to approximately $16.8 million.
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New York Mortgage Trust Inc. (NASDAQ:NYMT) invests in real estate-related assets like residential mortgage loans, preferred equity and joint venture equity. It doesn’t own physical properties.
On July 31, the company reported adjusted earnings per share at a loss of $0.25, significantly missing analyst expectations. Total net interest income increased 26% year-over-year to $19.04 million but fell short of estimates by over $4 million.
Sachem Capital Corp. (NYSEAMERICAN: SACH) is a Connecticut-based real estate finance company specializing in short-term loans secured by real estate in Connecticut. The loans, typically lasting three years or less, are personally guaranteed by the borrowers and often backed by additional collateral.
Sachem generates approximately $65 million in annual revenue. On Aug. 14, the company reported total revenue for the second quarter at $15.2 million, a 7% decrease compared to the same period in 2023.
The decline in interest income was attributed to a decrease in loan originations, modifications and extensions. Consequently, fee income, primarily from origination fees, decreased by 37.2% year-over-year.
Global Net Lease Inc. (NYSE:GNL) invests in commercial properties in the U.S. and Europe, primarily through sale-leaseback transactions. The company owns over 1,300 properties totaling nearly 67 million square feet, valued at $9.2 billion.
On Aug. 6, Global Net Lease reported a net loss per share of $0.20 for the second quarter, missing analyst expectations. Revenue for the quarter was $203.29 million, a 112% year-over-year increase but still fell short of estimates.
The company increased its adjusted funds from operations per share by 2% to $0.33 and reduced its outstanding debt by $251 million.
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This article 10 REITs To Supercharge Your Portfolio With Up To 18.6% Yield originally appeared on Benzinga.com
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