The Highest Paying REITs With Yields As High As 19.2%

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 |  Includes: AGNC, CIM, CMO, CYS, HTS, IVR, RSO
by: Tactical Investor

Traders should not base their investment decision on yield alone but examine some of the key metrics described below. In most cases, higher yields are associated with a higher degree of risk. It is okay to deploy some capital into riskier plays but betting the house is asking for trouble.

Debt to Equity Ratio is found by dividing the company's total amount of long-term debt (debts with interest rates that have a maturity longer than one year) by the total amount of equity. A debt to equity ratio of 0.5 tells us that the company is using 50 cents of liabilities in addition to each $1 dollar of shareholders equity in the business. There is no fixed ideal number as it depends on the industry the company is in. However, in general a ratio under 1 is acceptable and ideally it should be in the 0.5-0.6 ranges.

Current Ratio is obtained by dividing the current assets by current liabilities. This ratio allows you to see if the company can pay its current debts without potentially jeopardising their future earnings. Ideally the company should have a ratio of 1 or higher.

Price to free cash flow is obtained by dividing the share price by free cash flow per share. Higher ratios are associated with more expensive companies and vice versa; lower ratios are generally more attractive. If a company generated 400 million in cash flow and then spent 100 million on capital expenditure, then its free flow is $300 million. If the share price is 100 and the free cash flow per share are $5, then company trades at 20 times-free cash flow. This ratio is also useful because it can be used as a comparison to the average within the industry; this gives you an idea of how the company you are interested in holds up to the other companies within the industry.

Interest coverage is usually calculated by dividing the earnings before interest and taxes for a period of 1 year by the interest expenses for the same time period. This ratio informs you of a company's ability to make its interest payments on its outstanding debt. Lower interest coverage ratios indicate that there is a larger debt burden on the company and vice versa. Additional key metrics are addressed in this article 5 Stocks Sporting Lofty Yields As High As 16%

Quick ratio or acid test is obtained by adding cash and cash equivalents plus marketable securities and accounts receivable dividing them by current liabilities. It is a measure of a company's ability to use its quick assets (assets that can be sold of immediately at close to book value) to pay off its current liabilities immediately. A company with a quick ratio of less than 1 cannot pay back its current liabilities.

Price to tangible book is obtained by dividing share price by tangible book value per share. The ratio gives investors some idea of whether they are paying too much for what would be left over if the company were to declare bankruptcy immediately. In general stocks that trade at higher price to tangible book value could leave

The payout ratio tells us what portion of the profit is being returned to investors. A pay out ratio over 100% indicates that the company is paying out more money to shareholders, then they are making; this situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for sometime. Individuals searching for other ideas might find this article to be of interest 5 Plays With Stellar Payment Histories

Our favorite play on the list is American Capital Agency Corp. (NASDAQ:AGNC). It has a quarterly revenue growth rate of 320%, a ROE of 23.91%, quarterly earnings growth rate of 317%, a total three-year return of 127%, a three-year dividend growth rate of 37.9%, and a payout ratio of 78%. It has an operating cash flow rate of $509 million, a current ratio of 0.11 and a beta of 0.57. It also sports the following per share data; earnings of 7.1, sales of 5.32 and cash flow of 7.40

100K invested for five years in AGNC would have grown to 243,343

Stock

Dividend Yield

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

AGNC

19.30%

6.57B

6.05

920M

320.60%

0.57

757.27M

509.05M

CIM

16.80%

3.12B

6.76

-157M

-37.90%

1.27

614.10M

409.38M

CYS

16.90%

1.12B

6.60

263M

293.30%

0.19

182.06M

-6.34B

RSO

17.30%

441.20M

5.85

68.6M

29.20%

2.03

66.16M

15.32M

IVR

21.80%

1.81B

5.60

362M

197.60%

0.82

275.79M

231.42M

HTS

14.20%

2.13B

7.3

386M

79.00%

0.24

262.20M

258.58M

CMO

13.60%

1.11B

8.16

191M

66.20%

0.47

167.39M

185.26M

Click to enlarge

American Capital Agency Corp

Industry: REITs

Net income for the past three years

2008 = $35.36 million

2009 = $118.62 million

2010 = $288.12 million

2011= it stands at $445million and could top the $690 million mark.

Total cash flow from operating activities

2008 = $30.69 million

2009 = $93.23 million

2010 = $-19.62 million

Key Ratios

P/E Ratio = 4.1

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 5.47

Price to Book = 1.08

Price to Tangible Book = 1.08

Price to Cash Flow = 7.6

Price to Free Cash Flow = 115

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0

Total Debt to Equity = 0.01

Interest Coverage = 4.2

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 23.91%

Return on Assets = 2.44%

200 day moving average = 28.31

Current Ratio = 0.11

Total debt = 40.16B

Book value = 26.91

Qtrly Earnings Growth = 317.1%

Dividend yield 5 year average = 0%

Dividend rate = $ 5.60

Payout ratio = 78%

Dividend growth rate 3 year avg = 37.97%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2008

Total return last 3 years = 127.38%

Total return last 5 years = N/A

Chimera Investment Corp (NYSE:CIM)

Industry: Finance Intermediaries & Services

Net income for the past three years

2008 = $-119.81 million

2009 = $323.99 million

2010 = $532.86 million

2011= it stands at $371 million and could come in as high as $460 million

Total cash flow from operating activities

2008 = $30.67 million

2009 = $168.69 million

2010 = $305.59 million

Key Ratios

P/E Ratio = 6.2

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = -32.02

Price to Book = 0.93

Price to Tangible Book = 0.93

Price to Cash Flow = 6.2

Price to Free Cash Flow = -16.2

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 1.84

Total Debt to Equity = 1.84

Interest Coverage = 4.4

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 17.75%

Return on Assets = 6.55%

200 day moving average = 2.87

Current Ratio = 0.07

Total debt = 6.20B

Book value = 3.27

Qtrly Earnings Growth = -43.3%

Dividend yield 5 year average = 12.6%

Dividend rate = $ 0.51

Payout ratio = 104%

Dividend growth rate 3 year avg = 1.24%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2007

Total return last 3 years = 41.21%

Total return last 5 years = N/A

Warning

Dividend was cut from 13 cents to 11 cents

CYS Investments, Inc. (NYSE:CYS)

Industry: REITs

Net income for the past three years

2008 = $-34.45 million

2009 = $63.85 million

2010 = $22.39 million

2011= it stands at $249 million and could come in as high as $345 million

Total cash flow from operating activities

2008 = $752.72 million

2009 = $-880.74 million

2010 = $-2483.4 million

Key Ratios

P/E Ratio = 6.4

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 3.86

Price to Book = 1.03

Price to Tangible Book = 1.03

Price to Cash Flow = 4.8

Price to Free Cash Flow = -0.2

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0

Total Debt to Equity = 0

Interest Coverage = 17.2

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 28.22%

Return on Assets = 3.23%

200 day moving average = 12.88

Current Ratio = 0.01

Total debt = 7.64B

Book value = 12.98

Qtrly Earnings Growth = 4945.6%

Dividend yield 5 year average = 0%

Dividend rate = $ 2.25

Payout ratio = 181%

Dividend growth rate 3 year avg = 0%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2009

Warnings

Operating income has been declining and has been negative for the past two years and is on course to remain negative in 2011. This indicates that CYS is going to have problems making dividend payments unless this situation changes. A small positive development is that net income at least has been increasing for the past 3 years. Dividend was cut from 55 cents to 50 cents.

Resource Capital Corp (NYSE:RSO)

Industry: REITs

Net income for the past three years

2008 = $-3.08 million

2009 = $6.34 million

2010 = $19.45 million

2011= it stands at $36 million and could come in as high as $51million

Total cash flow from operating activities

2008 = $50.95 million

2009 = $46.63 million

2010 = $20.54 million

Key Ratios

P/E Ratio = 18.1

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 3.54

Price to Book = 1.04

Price to Tangible Book = 1.09

Price to Cash Flow = 16.1

Price to Free Cash Flow = 29.3

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 3.58

Total Debt to Equity = 3.88

Interest Coverage = 1.9

Inventory Turnover = N.A.

Asset Turnover = 0.1

ROE = 7.32%

Return on Assets = 1.36%

200 day moving average = 5.46

Current Ratio = 21.09

Total debt = 1.70B

Book value = 5.76

Qtrly Earnings Growth = 6.3%

Dividend yield 5 year average = 24.4%

Dividend rate = $ 1.00

Payout ratio = 313%

Dividend growth rate 3 year avg = -13.72%

Dividend growth rate 5 year avg = -6.74%

Consecutive dividend increases = 0 years

Paying dividends since = 2006

Total return last 3 years = 191.21%

Total return last 5 years = -34.9%

Invesco Mortgage Capital Inc. (NYSE:IVR)

Industry : REITs

Net income for the past three years

1900 = $0 million

2009 = $15.1 million

2010 = $98.4 million

2011= it stands at $207 million and could come in as high as $288 million

Total cash flow from operating activities

1900 = $0 million

2009 = $11.48 million

2010 = $71.53 million

Key Ratios

P/E Ratio = 4.1

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 4.68

Price to Book = 0.95

Price to Tangible Book = 0.95

Price to Cash Flow = 7.4

Price to Free Cash Flow = 60.6

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0

Total Debt to Equity = 0

Interest Coverage = 3.2

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 20.25%

Return on Assets = 2.82%

200 day moving average = 16

Current Ratio = 0.06

Total debt = 12.57B

Book value = 16.45

Qtrly Earnings Growth = 209.6%

Dividend yield 5 year average = 0%

Dividend rate = $ 3.42

Payout ratio = 89%

Dividend growth rate 3 year avg = 0%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2009

Warning

Dividend was cut from 80 cents to 65 cents.

Hatteras Financial Corp (NYSE:HTS)

Industry: REITs

Net income for the past three years

2008 = $79.13 million

2009 = $174.4 million

2010 = $169.5 million

2011= it stands at $168 million and could come in as high as $246 million

Total cash flow from operating activities

2008 = $77.32 million

2009 = $181.79 million

2010 = $176.27 million

Key Ratios

P/E Ratio = 6.8

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 5.22

Price to Book = 1.04

Price to Tangible Book = 1.04

Price to Cash Flow = 8.1

Price to Free Cash Flow = 73.5

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0

Total Debt to Equity = 0

Interest Coverage = 3

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 16.19%

Return on Assets = 1.96%

200 day moving average = 3.74M

Current Ratio = 0.04

Total debt = 16.12B

Book value = 26.32

Qtrly Earnings Growth = 82.7%

Dividend yield 5 year average = 0%

Dividend rate = $ 3.90

Payout ratio = 97%

Dividend growth rate 3 year avg = 15.71%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2008

Total return last 3 years = 62.94%

Total return last 5 years = N/A

Warning

Dividend was cut from $1.00 to 90 cents.

Capstead Mortgage Corp. (NYSE:CMO)

Industry : REITs

Net income for the past three years

2008 = $125.93 million

2009 = $129.27 million

2010 = $126.9 million

2011= it stands at $118 million and could come in as high as $159 million

Total cash flow from operating activities

2008 = $192.45 million

2009 = $183.66 million

2010 = $202.01 million

Key Ratios

P/E Ratio = 7.5

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 4.77

Price to Book = 1.08

Price to Tangible Book = 1.08

Price to Cash Flow = 9.7

Price to Free Cash Flow = 12.9

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0.1

Total Debt to Equity = 10.34

Interest Coverage = 3.3

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 13.39%

Return on Assets = 1.46%

200 day moving average = 12.51

Current Ratio = 0.03

Total debt = 11.23B

Book value = 12.54

Qtrly Earnings Growth = 73.2%

Dividend yield 5 year average = 12.7%

Dividend rate = $ 1.76

Payout ratio = 0%

Dividend growth rate 3 year avg = -1.71%

Dividend growth rate 5 year avg = 162.8%

Consecutive dividend increases = 0 years

Paying dividends since = 2001

Total return last 3 years = 72.54%

Total return last 5 years = 157.37%

Warning

Dividend was cut from 44 cents to 43 cents.

Conclusion

The markets are overbought; the targets for the SPX which we issued over six weeks ago have been fulfilled (1305-1325). Investors would be best served by waiting for a strong pullback before committing new money to this market. Dividend investors can sell covered calls and or puts (only if you are bullish on the stock) to open up additional streams of income.

All dividend history charts sourced from dividata.com and all earning estimate graphs sourced from dailyfinance.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is very important that you check the finer details, do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.