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This is Part VI in the dividend scorcher series. Part V dealt with REITS that offered dividends as high as 26% The purpose of this series is to provide a list of the highest paying dividend REITS that can serve as a starting point for investors searching for high dividends. Investor should use these lists as a starting point, and not view them as a buy to list of REITS. Many factors need to be examined before putting any money into these stocks; for example payout ratio, are dividends increasing or decreasing, is the revenue stream stable, etc. In addition, investors need to determine how much risk they are willing to take up front, and not after purchasing these stocks. Do your due diligence before deploying any money into these stocks.

Stock

Dividend

Debt to Equity ratio

Market Cap

PE

Total Cash

Operating margins

Revenue

Operating

Cash flow

HTS

15.3

N/A

1.95B

6.5

238M

93.2

225

214m

CWH

11.00

97%

1.63B

8.3

194M

22.14%

772M

_

AGNC

19.9%

1

6.28B

4.6

402M

92.5%

757M

-----

ANH

14.8

4%

838M

7

14.4M

89.9

128

232m

PCC

8.4

64%

78.7M

19

14.7M

42.8

10.9M

-6.98m

ADC

7.6

58%

237M

11.59

----

61.1

44.5

5.24M

MNR

7.3

97%

309M

17

7.72M

47.4

47.9M

20.4M

Hatteras Financial Corp (HTS)

It has been paying dividends since 2008. Forbes has labelled it as a top 10 REIT stock. The report noted that among REITs, HTS shares displayed both attractive valuation metrics and strong profitability metrics. For example, the recent HTS share price of $26.07 represents a price-to-book ratio of 1.0 and an annual dividend yield of 15.34%. By comparison, the average stock in Dividend Channel’s coverage universe yields 4.4% and trades at a price-to-book ratio of 1.9. The report also cited the strong quarterly dividend history at Hatteras Financial Corp, and favorable long-term multi-year growth rates in key fundamental data points:

  • Short percentage of float 9.7
  • ROE 15.05%
  • Book value 26.72
  • Payout ratio 97%
  • Dividend growth rate 3 year average 44.27
  • Quarterly earnings growth (y-o-y) 110%
  • Consecutive dividend increases 2 years

CommonWealth Reit (CWH)

It has been paying dividends since 2010. It is trading below book value and sports a price to book ratio of 0.6. Motely fool has in it in its top 25 REITS to own list as well as top 25 dividend stocks to own. Total cash flow from operating activities is $252 million and total amount paid to dividends is roughly $178 million. Even though the payout ratio is high, it has enough cash flow to cover its dividend costs. Investors should, however, pay attention to the rather high payout ratio before deploying funds into this REIT.

  • Percentage held by Insiders 5.77
  • Short percentage of Float 18.6%
  • Payout ratio 952%
  • Sales growth for the current year (estimate) 12.4%
  • EPS $0.13

American Capital Agency Corp (AGNC)

It is one of the top REITS in terms of ROE (23.9%), quarterly earnings growth (y-o-y) and 3 year returns; its total return for the past 3 years is over 134%. On top of this it is has a very high yield of 19.9%.

  • Short percentage of float 6%
  • ROE 23.9
  • Book value 26.91
  • Payout ratio 75%
  • Dividend growth rate 3 year average 97%
  • Quarterly earnings growth (y-o-y) 317%
  • Consecutive dividend increases 2 years

Anworth Mortgage Asset Corp (ANH)

It has been paying dividends steadily since 1998. The dividend payout ratio is 107%, much better than many of its peers. Total cash flow from operating actives was roughly $463 million, which is more than enough to cover the dividend payments of roughly $126 million.

In a recent article Forbes rated it as one of the top 10 dividend stocks. The report noted that among the coverage universe, ANH shares displayed both attractive valuation metrics and strong profitability metrics. For example, the recent ANH share price of $6.37 represents a price-to-book ratio of 0.9 and an annual dividend yield of 14.44% — by comparison, the average company in Dividend Channel’s coverage universe yields 3.8% and trades at a price-to-book ratio of 2.1. The report also cited the strong quarterly dividend history at Anworth Mortgage, and favorable long-term multi-year growth rates in key fundamental data points.

  • Short percentage of float 4.7
  • ROE 12.07%
  • Book value 7.09
  • Payout ratio 107%
  • Dividend growth rate 5 year average 86.2%

PMC Commercial Trust (PCC)

  • Short percentage of float 1.6
  • Percentage held by insiders 10.64%
  • ROE 3.12
  • Book value $14.07
  • Payout ratio 142%
  • Dividend growth rate 3 year average -11.29
  • Quarterly earnings growth (y-o-y) 9.5%
  • 5 year dividend yield average 10.3%
  • Paying dividends since 1994

Agree Realty Corp (ADC)

  • Short percentage of float 10.2%
  • ROE 6.13
  • Book value 17.17
  • Payout ratio 117%
  • Dividend growth rate 5 year average -2.43
  • Dividend yield 5 year Average 7.9%
  • Consecutive dividend increases 3 years
  • Paying dividends since 1990

Monmouth Real Estate Investment Corp (MNR)

  • Short percentage of float 4.2
  • ROE 7.08
  • Book value 5.18
  • Payout ratio 130%
  • Quarterly earnings growth (y-o-y) 73.3%
  • 5 year dividend yield average 7.6%
  • Paying dividends since 1990

Conclusion

The first thing investors should remember is that REITS will not perform well once rates start to rise. As the Fed has agreed to stand pat till 2013, REITS should in general hold up relatively well to the general market. Keep in mind that Operation Twist could have an impact on the performance of some REITS. In theory, this could be offset by increasing their leverage, but this could have a detrimental effect in the long run if interest rates start to rise.

REITS should not be viewed as long-term investments unless the Fed explicitly states that it will maintain this low-rate environment. As the U.S. debt to GDP ratio is now past 100%, it seems unlikely that investors will want to keep buying bonds for the long haul, where the interest rate is negative when inflation is factored in. At some point the focus will move from Europe to the U.S., and when it does, investors will find out that things are not that much better here.

Source: Dividend Scorchers With Yields Up To 19.9%, Part VI: REITs