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This is part V of the Dividend scorcher series (see parts I, II and III). Part IV covered REITS that paid out dividends as high as 18.1%. This list should be viewed as a starting point and not as buy to list of stocks. Investors should do their due diligence before deploying any of their money in the stocks listed below.

Detailed information on each of the REITS is provided below.

Stock

Dividend

Debt to Equity ratio

Market Cap

PE

Total Cash

Operating margins

Revenue

Cash flow

EFC

16.9%

---

287

6.97

193M

66.4

50.92M

-490M

REM

11.5%

N/A

227M

N/A

---

-----

------

-------

NRF

11.6

334

330M

2.23

191.2M

40.68

306.46M

40.47M

MPW

8.5

83

1.07B

10.63

227.9M

54.99

132.54M

73.38M

NLY

15.5

7

15.62B

6.3

996M

91.2

2.27B

7.05B


Ellington Financial LLC (EFC)

EFC has a very low short interest ratio even though it has a negative cash flow rate. Total cash flow from operating activities was $108 million and dividend payments only amounted to$ 6.7 million. If it is able to maintain this rate, it should have no problems covering dividends payments, even if the dividend payout ratio surged past 100%.

  • Percentage held by Insiders: 13.54

  • Short % of float: 0.40

  • ROE: 11.49

  • Forward dividend: 8.9%

  • Book value: 23.31

  • Payout ratio: 93%

  • Dividend payout ratio 5 yr average: N/A

  • Beta: -----

  • Net Income: $38.00 Million

IShares FTSE NAREIT Mortgage REITs Index ETF (REM)

REM is an ETF so its set up is completely different. It invests in MREITS instead of investing directly in Agency or Non Agency paper. Its largest holding is Annaly Capital Management Inc (NLY), which accounts for 23.99% of its assets. The second largest holding is American Capital Agency Corp (AGNC.)

  • 5 year dividend average: 11.7%

  • Consecutive dividend Increases: 1 year

  • Dividends paid since 2007


Northstar Realty Finance Corp (NRF)

According to Yahoo Finance, it has a book value of $9.36 and based on its current price of $3.44 it is trading significantly below book value. One must weigh this positive against the fact that it has a debt to equity ratio in excess of 300%.

  • Percentage held by Insiders: 2.2

  • Short % of float: 9.2

  • ROE: -38.9

  • Forward dividend: 11.6

  • Dividend 5 year average: 15.6%

  • Book value: 9.36

  • Beta: 2.22

  • Consecutive dividend increases: 0 year


Medical Properties Trust Inc (MPW)

  • Percentage held by Insiders: 1.81

  • Short % of float: 6.00

  • ROE: 3.39

  • Forward dividend: 8.4%

  • Dividend 5 year average: 9.1%

  • Book value: 7.78

  • Payout ratio: 320%

  • Dividend payout ratio 5 yr average: 258%

  • Beta: 1.87

  • Quarterly earnings growth rate (y-o-y): -57

  • Consecutive dividend increases: 0 years


Annaly Capital Management Inc (NLY)

  • Percentage held by Insiders: 0.44

  • Short % of float: 4.8

  • ROE: 17.11

  • Forward dividend: 14.9

  • Book Value: 16.55; it is trading slightly below book value

  • Dividend growth rate 5 year average: 46.38

  • Payout ratio: 84%

  • Dividend payout ratio 5 yr average: 116%

  • Beta: 0.18

Conclusion

MREITS have taken a beating as a result of Operation Twist. Investors appear to have overreacted and so there are potentially many good plays in this sector; one such example is Annaly. For those looking for REITS that offer rates higher than 16%, consider Two Harbors Investment Corp (TWO) and Invesco Mortgage Capital (IVR).

Two Harbors is another company we have mentioned in the past. It has a dividend rate of 18% and is trading approximately 5% below book value. Two Harbors Investment Corp purchases both Agency and Non agency paper. It also only has a leverage rate of 4.2:1; for every 1 dollar in equity, it has $4.20 in debt. This leverage is much less than that of Annaly and Invesco, Armor Residential REIT, Inc. (ARR), CYS Investment Inc. Common St. (CYS) and American Capital Agency Corp. (AGNC).

It is also generating enough cash flow to handle the dividend payments: Total cash generated from operating activities was 33.11 million and dividend payments amounted to 27.12 million. Total cash flow from operating activities also jumped significantly from 2009. In 2009 total cash flow from operating activities was $11.36 million and in 2010, it surged to $33.11 million.

Invesco is another company we recently covered. Invesco has a whopping yield of 26%, a payout ratio of 96%, is trading below book value and is generating enough cash to cover its dividend payments. It is trading roughly 5 dollars below book value, and this might explain why insiders have been picking up shares lately.

I would not look at any REITS as a long-term investment unless the Fed states that they are going to maintain the current low interest rate environment after 2013.

Source: Dividend Scorchers With Yields As High As 26%, Part V: REITS