With the commercial and residential real estate markets approaching a bottom, in our opinion, now could be a good time to ride the wave on up with REITs. Additionally, given the nature of REITs, collecting dividend payments is an added bonus. By law, REITs have to pass on 90 percent of their taxable income to stockholders.
Below are 5 REITs that you should consider for your fixed-income portfolio. And if REITs aren’t your thing, we came up with 5 safe dividend ideas you can read about here and, also published recently, Smart Investors Should Look at 5 High-Yielding REITS.
Annaly Capital Management (NLY) This company has been around since 1997, and has paid a healthy quarterly dividend going back 10 years. The most recent dividend was $0.62, which is a 13.6 percent current yield.
The company also beat 2010 earnings expectations, reigning in $2.60 per share compared with $2.44 in analyst estimates. The company invests primarily in mortgage pass through certificates, collateralized mortgage obligations and other MBS representing interests backed Ginnie Mae, Freddie Mac (FMCC.OB) and Fannie Mae (FNMA.OB). Revenues fell by 30.85% in 2010, after increasing by 70.83% in 2009 and 154.11% in 2008. Also, the company posted fat EBT margins in 2010 and 2009 with 88.32% and 93.79%, respectively. We think this is a safe idea for a retirement portfolio.
The next dividend payment should be announced after the second week of June for payment at the end of June. We suggest this specifically for income investors because we do not expect much capital appreciation nor do we expect much on the downside.
Starwood Property Trust (STWD) reflects that the commercial and residential real estate market has turned a corner. 2010 Q1, Q2, and Q3 net incomes came in as positives. We think investors should consider looking into adding a position. By the way, the current yield is a robust 5.25 percent. The company originates, invests in, and finances commercial mortgage loans and other CRE debt investments. It also invests in residential MBS and residential mortgage loans.
Colony Financial (CLNY) pays out a healthy current yield of 7.1 percent. Just like Starwood, the company turned a profit in 2010. The 52 week range is $16.50 to $21.45. Since August 2010, there is a strong and technically upward trend. The company acquires, originates and manages commercial mortgage loans in the United States and Europe.
Chimera Investment (CIM) CIM is the little engine that could. Trading in the high 3s it pays out an aggressive current yield of 15.1 percent. The share price has been hovering around this level since September 2010, and the median target price is $4.10 a share. The play is not capital appreciation, it is for the dividend payments. The company grew profits by 64.47% to $533 million in FY 2010 through October, after posting a return to positive territory in FY 2009 by drawing in $324 million in profits from - $120 million in FY 2008.
Apollo Commercial Real Estate Finance (ARI) is a young company that came into being in the post-2008 world. It made all dividend payments in 2010, and the current yield is 9.9 percent. The 52 week low is $15.581, 52 week high is $17.61 and trades currently in the low 16s. The company originates, acquires, invests in and manages performing commercial first mortgage loans, commercial MBS, mezz financings and other CRE debt investments in the U.S.
As always, we believe these names are a good starting point for your own research. Please do your own due diligence before you consider adding a position in any of the REITs above.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.